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.
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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
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