The Discretionary Trust is a very attractive solution
Posted: Wed Feb 19, 2025 10:31 am
The provisions of the Trust Deed can provide for restrictions that the Settlor wishes to put in place. In addition, the Settlor may elect to appoint a Protector, who is usually a trusted professional adviser, to oversee the Trustees and ensure compliance with the Trust provisions. The Protector retains certain powers as desirable, to make sure that the Trustees achieve the objectives of the Trust in congruence with the Trust Deed. Whilst the inclusion of the Protector can provide controls, it is important to not restrict the Trustees so as to erode the effectiveness of the Discretionary Trust.
Finally, the Settlor can guide the Trustees by providing a Letter of Wishes. The Letter of Wishes provides a statement of the Settlor’s intentions at that point in time, allowing the Trustees to take this into consideration when making decisions luxembourg mobile database and distributions. So long as the Letter of Wishes is regularly reviewed, it can provide fantastic insight into the Settlor’s mind as circumstances change – albeit, this document is persuasive and not binding; it creates no legal obligation on the part of the Trustees.
That delivers maximum flexibility and gives the potential to remove tax liability from the Settlor’s estate – although this flexibility comes at a price. Discretionary Trusts can be complex, requiring specialist knowledge to avoid pitfalls – the Settlor needs to understand that they are placing their assets under the control of their chosen Trustees, who must act bona fide in line with the Trust Deed, but not necessarily in line with their wishes – so long as they consider it is in the best interests of the Trust and Beneficiaries.
Finally, the Settlor can guide the Trustees by providing a Letter of Wishes. The Letter of Wishes provides a statement of the Settlor’s intentions at that point in time, allowing the Trustees to take this into consideration when making decisions luxembourg mobile database and distributions. So long as the Letter of Wishes is regularly reviewed, it can provide fantastic insight into the Settlor’s mind as circumstances change – albeit, this document is persuasive and not binding; it creates no legal obligation on the part of the Trustees.
That delivers maximum flexibility and gives the potential to remove tax liability from the Settlor’s estate – although this flexibility comes at a price. Discretionary Trusts can be complex, requiring specialist knowledge to avoid pitfalls – the Settlor needs to understand that they are placing their assets under the control of their chosen Trustees, who must act bona fide in line with the Trust Deed, but not necessarily in line with their wishes – so long as they consider it is in the best interests of the Trust and Beneficiaries.