Discretionary Trust and Inheritance

[Boss13]

We have been advised that a suitable planning strategy may be setting up a will with discretionary trust structure.

I had many questions for the advisor and asked a lot so far but have a lot more too. Don't want to get into something we don't fully understand so want to be thoroughly researched on this.

Has anybody had experience of doing this and if so what did you see as the pros and cons?

From what I know so far, big advantage seems to be passing down generations is hugely beneficial with this type of arrangement and it saves you taxing the same assets multiple times over the generations.

Still need to do some reading on things like the 10 year taxing rule and in the real world how easy is it to wind up a trust or take cash or assets out.

Apologies for the dull subject!

[ralphy]

I would recommend seeing a solicitor who is a member of the TEP society (Trust and Estate Practioner) to obtain professional and up-to-date advice.

R

[Omegamanic]

I work in the industry. I would get professional tax advice.

[Boss13]

Thank you both.

I did take initial advice from a qualified advisor. Waiting for their quotation to implement their advice. Just looking to sense check and in general the pros and cons of going this route.

A lot to take in and I guess putting all your eggs in one basket and trusting what one advisor tells you makes me slightly nervous.

I may speak to another advisor to sense check.

[Suds]

Personally, I ran scared of the potential pitfalls of placing assets in the hands of a trust in that the trustee effectively becomes the legal guardian (I read owner) of assets - my life experiences made me worry about both potential rogue actions and concerns my assets might be included in the assets of an unfortunate trustee. That said, my financial circumstances are very simple so I just gifted shares of my family home to my intended beneficiaries. Complex considerations involved - I wish you sage advice and a clear pathway for all eventualities.

[WTRacer]

I had a lengthy reply set out for you on this subject, then rewrote it entirely, then removed that one too. Half an hour later I'm still unsure if I can help you out here, whilst discretionary will trusts are fairly simple devices in the grand scheme of estate planning there is still plenty to understand about how they operate on a factual basis. Use of your preferred search engine and several hours reading should prove useful here. The real difficulty is in assessing the suitability of the vehicle for your circumstances, which ofc leads back to paid advice.

However I try to simplify things even to the most basic and general principles, significant pitfalls remain. As an example (leaving aside the major issue of potentially being deemed to give advice in an unregulated manner) you and I could have a long back and forth on the merits or otherwise of this choice, I give you loads of factually accurate info which you then use and determine the DWT's are suited (in conjunction with the advice you're being given already). You get the potential advantages and disadvantages, you go in eyes open.
Despite it being a 'dull' subject, 6 months later you end up chatting to mates over a pint and having explained what you did, one says wtf you should have used a carve out trust, they're great. The other mate says sure they can be useful but what you really want is an excluded property trust. You do some reading/take further paid advice and discover a discounted gift trust would have been way better suited to your situation. Despite this being both a silly and unrealistic example I hope the simple inference is clear. Nobody here can really help in a meaningful way without knowing your situation. Nobody in their right mind would disclose the level of detail required to enable a worthwhile discussion, nor would any sensible person undertake to help even if you did.

I could, and did in an earlier deleted response, list some pros and cons. Some are obviously generic but many are simply too tied into your circumstances.

All that said, if you have any questions which are purely factual I'll happily try to answer.

One general rule of thumb to remember in IHT mitigation, success usually involves giving up one or more of the following: Control, Access, Ownership. There are exceptions though!

Your intention to seek out a second advisor is wise imo, perhaps under the pretext of IHT mitigation in general. See if their suggestions match with those of the initial advice. If not, why not.

Good luck.