What is a discretionary trust?
A discretionary trust is one where the trustees decide which of a class of beneficiaries receives money, how much, and when — no beneficiary has a fixed entitlement. This flexibility makes it useful for vulnerable beneficiaries, changing family needs, and asset protection, guided by your letter of wishes. Discretionary trusts have their own inheritance-tax and income-tax rules.
Detailed explanation
Flexibility is the whole point: the trustees adapt to circumstances you can't predict.
- Beneficiaries are a class (e.g. “my children and grandchildren”), not fixed shares.
- Trustees exercise discretion, often guided by a letter of wishes.
- Useful where needs may change, or to protect a vulnerable beneficiary's position.
- Subject to specific trust tax rules (periodic and exit charges, trust income-tax rates).
Parents leave their estate to a discretionary trust covering their three children. One child later faces financial difficulty; the trustees, guided by the parents' letter of wishes, can direct more support to that child without locking in fixed shares in advance.
- Complete the questionnaireA few guided questions about you, your family and your wishes.
- Structured reviewYour answers are checked automatically for completeness and consistency before your will is produced.
- Receive your documentsYour will and supporting paperwork are produced, ready to print.
- Sign correctlyClear instructions on signing and witnessing so the will is legally valid.
- Protect your familyYour wishes are recorded and your loved ones are spared the intestacy default.
Sources
- GOV.UK — Trusts and taxes
- GOV.UK — Types of trust
- Trustee Act 2000 — legislation.gov.uk
- Reviewed by
- ClearLegacy editorial team
- Last reviewed
- June 2026
- Next review
- December 2026
- Jurisdiction
- England & Wales
Frequently asked questions
What is a discretionary trust?
It is a trust where the trustees decide which beneficiaries receive money, how much and when, rather than fixed shares. It is flexible and useful for vulnerable beneficiaries, guided by a letter of wishes, but has its own tax rules.
How are discretionary trusts taxed?
Discretionary trusts have their own regime — potential periodic (ten-year) and exit inheritance-tax charges, and income taxed at trust rates. The detail is complex, so take advice when setting one up.
Make your will the simple way.
ClearLegacy guides you through a valid England & Wales will online, professionally structured and guided at every step.
Start your will