Setting-up a discretionary trust in the UK: we all want to make sure our family is taken care of once we aren't around any more, and the UK discretionary trust establishment is one way of helping to ensure this. Discretionary trusts are a flexible type of trust. The trustees can choose how and when some or all of the capital of the trust fund will be used, and for whose benefit. The trust deed identifies the beneficiaries, and the trustees can choose which of the beneficiaries will benefit from the trust.
Setting up a discretionary trust: to start-up a discretionary trust, you need to identify the assets, decide on the beneficiaries, appoint trustees, and outline the terms. Coddan can help you with each stage of the process trust start-up and a company formation. We can then draw up a trust deed that includes the identities of the beneficiaries and trustees, how the assets are to be managed, which assets are being passed into the trust, the permitted use of the assets, and who receives the assets when the trust is terminated.
NEXT YEAR FROM £300.00
The first option of the discretionary trust start-up in the UK is the fastest process with online discretionary trust set-up, and printed documents as well.
The following benefits are included into this setting-up a discretionary trust in the UK package:
NEXT YEAR FROM £900.00
This discretionary trust start-up in the UK package is especially for clients, who are requiring starting-up a discretionary trust with a registered address, local agent & a nominee trustee; bank account upon request.
This UK discretionary trust set-up offer includes everything in the first option, together with the advantages of:
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This is one of the most popular discretionary trust set-up in the UK packages with offshore bank account, as an additional option to the discretionary trust start-up.
This UK discretionary trust starting-up offer includes the following:
NEXT YEAR FROM £900.00
This is our most comprehensive discretionary trust set-up in the UK package with all documents verified by solicitor or notary public & certified by the Apostilled stamp or Apostille seal affixed.
This UK discretionary trust start-up offer includes everything in the third option, plus:
Discretionary trusts are commonly used to keep the trust assets separate from the beneficiaries' estates in order to avoid inheritance tax. This kind of trust is particularly useful if the settlor has identified beneficiaries but doesn't know which of them is going to need future financial help. At Coddan, we can help you with registering a discretionary trust and making sure your beneficiaries get everything they deserve.
Setting-up a discretionary trusts services: at Coddan, we have the experience and knowledge to get your discretionary trust set up quickly and smoothly. We can take care of all the paperwork and procedures, ensuring your UK discretionary trust registration application meets all the necessary criteria and is successful. By using our UK discretionary trust establishment services, you can save yourself all the time and hassle that is often associated with registering a trust.
Whether you need an off-shore company up and running within a matter of days, or your payroll set up and taken care of, Coddan is here to take care of all your UK discretionary start-up and administration needs. Get in touch today on 0330 808 0089 to find out more about how our UK discretionary trust start-up services could help you.
However, registering a discretionary trust can be complicated and demanding. Thankfully, the discretionary trust registration agents, who can carry out the discretionary trust registration for UK and non-UK customers. They will get your new discretionary trust incorporated whilst complying with all regulations & requirements, and they will usually provide a range of additional services in order to get your new business project off to the best possible start. As well as lodging all the necessary information and documentation, new discretionary trusts formation for customers will often also include the provision of a trustee - meaning your new discretionary trust can start operating within days. Agents will ensure all documentation is completed and submitted according to regulations, and they will also offer other services designed to get your new discretionary trust incorporated efficiently.
What are the benefits of setting up a discretionary trust in the UK? Discretionary trusts allow the settlor, or the person who owns a life policy, to pass on their policy to a group of friends, or trustees, who will look after the policy until the time comes to cede it to the beneficiaries.
The beneficiaries come from a group chosen by the settlor. However, it is the trustees who decide who from this group receives the money, how much each person receives, and at what point they receive it.
The life policy, in this instance, is said to be "in trust". There are a number of benefits to a life policy being "in trust", as follows: -
Money is paid out more quickly: discretionary trusts can be used to ensure that money can be paid out to the right people quickly, without family members and beneficiaries having to pursue prolonged court action. Usually in the case of someone's death, probate will need to be granted, which can take a while. UK discretionary trusts are already placed in the hands of trustees, so this lengthy process is negated.
Easier to control funds: if a policy is in trust, the settlor can outline who they want the money to be paid to. A trust controls when the discretionary trust money will be paid out, and how much will be awarded. This ensures that dependants receive some financial support, but do not have full access to the money to use as they see fit.
Inheritance tax is minimised: as the funds paid out under discretionary trusts are not part of the settlor's estate, they are not subject to inheritance tax, although a small form of entry charge may be applied. Consult Coddan - we can advise you further on inheritance tax and all it entails.
The flexibility of a discretionary trust means the appointed trustees have a lot of power over the trust income, including how it can be used and distributed. It is the trustees' decision which beneficiaries will receive payment, subject to the terms of the contract in place.
This freedom means the trustees are able to decide when payments will be made and how much will be paid. Additionally, the trustees are in a position to apply restrictions on the beneficiaries, should they decide to.
Registering a discretionary trust is especially useful in situations where the settlor creating the trust wants to benefit more than one person, and doesn't yet know which of the beneficiaries will require more financial help.
An example of this is when a settlor sets up the trust for their children or grandchildren. Discretionary trusts are also useful in situations where the beneficiary that the settlor wants to appoint is not ready or able, for whatever reason, to be held responsible for the money.
Another major advantage of this type of trust is that its funds will not be taken into account during the calculation of means-tested benefits. Additionally, the money from a discretionary trust is not included as part of a beneficiary's estate, due to conditions relating to inheritance tax.
With this type of trust, you are able to appoint yourself as a trustee so that you can also contribute to the trustees' decisions, and have input with regards to what happens with the money. Failure to do so will mean that the trustees are not entitled to fulfil your requests, and you are therefore not guaranteed to have the final decision over what happens to the assets.
A discretionary trust can be very useful when you require an extremely flexible trust. Uses for this kind of trust include protecting and controlling family assets and ensuring effective inheritance planning.
If you decide that a discretionary trust suits your needs, you need to carefully prepare the necessary information to register it. At Coddan, we are experts in limited company and UK trust formation, so we can help you with all the incorporation procedures surrounding trust registration.
Before registering your trust, you need to: -
Decide on the assets: decide on and list the assets that will be part of the UK discretionary trusts, and include the value of these assets. Assets can include investments, money, buildings and land.
Identify the beneficiaries: determine the people or entities that will receive benefits from the UK discretionary trust, and note the percentage of the benefits each beneficiary will be entitled to.
Appoint a trustee (or trustees): choose a person, people or management company (banks are frequently used) that you trust as the trustee will have significant legal authority and control over your discretionary trust assets.
Outline your terms: you should make sure you have clearly identified the trust's objectives, the identities of the trustees and beneficiaries, the original assets, how the benefits will be paid, how the trust may be terminated, and rules for operating the trust bank account.
Create a trust deed: once all the above points have been decided upon, you can create a UK discretionary trust deed. Trust deeds are legal documents that outline the powers of the trustees and the rules which govern your fund. Professional UK trust establishment help is crucial when drawing up a trust deed to ensure everything is legally sound.
For many people with a significant number of assets, a discretionary trust provides a suitable vehicle for protecting their wealth from the depredations of the taxman and other interested parties. Unlike many other trust models, a discretionary trust places considerable power in the hands of the trustees, potentially enabling them to vary the level of funds paid out to beneficiaries, or even decide that at the current time, beneficiaries should not be granted access to trust support.
If you feel that a discretionary trust may be the most appropriate financial structure for your wealth, Coddan can provide the expertise you need to draw up, formalise and administer a legal, correctly formulated discretionary trust.
Limit beneficiaries and distribution: the nature of a discretionary trust is such that the number of beneficiaries can be limited, and distribution of assets can be restricted, by trustees.
This can be helpful in preventing beneficiaries from squandering money inappropriately and can also be of value in bankruptcy cases - monies held in the trust cannot form part of a beneficiary's assets when they declare themselves bankrupt.
We can provide trustees and administrative details: if you are concerned about obtaining suitable people to act as trustees, Coddan can provide appropriate contact details for suitable individuals, without compromising your control of the trust. We can also draw up the necessary paperwork and submit it for ratification to verify that your discretionary trust is a valid legal entity.
UK discretionary trust post-formation documentation: once your trust is up and running, why not let Coddan undertake the necessary reporting work? Our in-house team has the expertise to compile annual reports, provide appropriate financial documentation and produce well-presented, professionally compiled summaries, constitutions and other useful paperwork.
We know your family are the most important people in your life - so when the time comes to pass on your assets to them, it's a good idea to consider ways to minimise the amount they could lose in inheritance tax.
One of the most effective ways to do this is by using a trust fund, thereby entrusting your assets to somebody else on behalf of the beneficiary - meaning they're no longer in your possession and are unlikely to be subject to inheritance tax. Coddan Ltd can help, providing expert advice and a one-stop service to set up the arrangement.
We've shared some guidance below on how trust funds work and how you can ensure that the people you love are provided for.
What is a trust fund? It's a legal arrangement in which your assets - be it cash, property or investments - are looked after by someone else who manages them responsibly until the point at which you arrange for them to be passed on to the beneficiary.
For example, you might wish for a lump sum to be passed on to your child when they turn 21, or for regular payments to be made to them after a certain date.
How do they work? They can work in several different ways depending on which type of trust you choose. A 'bare trust' is the simplest option, from which the beneficiary receives all the assets immediately (provided they're over 18).
An 'interest in possession trust', meanwhile, allows the beneficiary to take a regular income from the trust but they cannot access it in its entirety. Income tax will usually be due in this kind of arrangement. A discretionary trust gives full control of the assets to the trustees, who might, for example, be the parents of your grandchildren, while a mixed trust allows for these options to be combined.
Under a discretionary trust, the person who owns a life policy, commonly referred to as the settlor, cedes their policy to a group of trustees, who legally own the policy until the time comes to relinquish it to the settlor's named beneficiaries.
The beneficiaries are personally decided upon by the settlor. However, it falls to the trustees to make a decision on when the beneficiaries receive their share of the trust fund, and, indeed, how much each person receives.
Under such a situation, it might seem as if the trustees retain all the power. So, what are the rights of the settlor and the beneficiaries under such an arrangement?
Settlor rights: first of all, it's important to note that it's up to the settlor to guide the trustees on how they'd like the discretionary trust to be used; the trustees can only act in a way that is allowed by the terms of the policy. The settlor can dictate his or her wishes through a written letter.
Once a settlor has placed his or her life policy into a discretionary trust, they no longer have personal legal ownership, although they must still keep up with policy premiums. The settlor is also a trustee, and, of course, is responsible for choosing both trustees and beneficiaries.
Beneficiary rights: a number of people will automatically be named in the discretionary trust as beneficiaries, including any spouses, children, grandchildren, close relatives or estate beneficiaries. The settlor can also name additional beneficiaries.
Beneficiaries actually have very few rights – in fact, none are guaranteed to receive a single penny from the policy. The only assurance provided is that trustees must act in their best interests at all times.
Unsure about whether you'd like to pursue your interest in converting your life policy into a discretionary trust? Coddan can offer balanced, professional advice, with no obligation to proceed with any form of financial commitment.
At Coddan, we are experts in establishing all manner of financial trusts and partnerships, including discretionary trusts. However, we are also adept at advising our customers on the specifics of such trusts, and one question we regularly get asked is: what are my rights as a trustee?
In a discretionary trust, trustees are awarded legal ownership of a trust fund by the policyholder and are entrusted to take care of the fund until a claim is made on the policy. In the case of a claim being made, trustees are responsible for deciding which of the trust's beneficiaries payment will be made to, when they will be paid and how much they will receive.
Trustees – who must be sound of mind and above the age of 18 - have the right to use discretionary powers in their role as legal owners of a trust fund's assets. They are somewhat guided in their actions by the wishes of the settlor, but, by nature, discretionary trusts are flexible, and it is a trustee's role to interpret a family's situation when a claim is made on the policy.
If one beneficiary is in dire need of financial help, while another is a multi-millionaire, for example, trustees will need to come to an agreement on whether one is more deserving than the other.
In coming to such a decision, it is the right of each trustee that they are fully informed of all relevant circumstances, so they can make a fair and honest judgment. As far as they possibly can, trustees must act honestly and responsibly in their decision-making, and there must be unanimous agreement among trustees before payments can be made to any beneficiaries.
Trustees are responsible for the proper maintenance and documentation of trust assets and property, and they are also liable for any tax that must be paid on the policy – but not for the actual policy payments.
A discretionary trust, which is a legal arrangement, enables the owner of a life policy to give the policy to a trusted group of people, the trustees, who look after it. Then, at some time in the future, the trustees pass it on to beneficiaries chosen by the life policy owner.
The trustees have some discretion about how much each beneficiary will receive and when. A life policy looked after in this way is said to be "in trust". Any payment received from the policy is called the trust fund.
Discretionary trusts and their tax obligations are more complex to set-up than a bare trust, but if properly implemented they can have a positive impact on your tax bill.
They have been utilised for many years by people wishing to pass on their assets to family members and lessen the heavy penalty of inheritance tax. A discretionary trust will help ensure the money paid out from a life policy will be paid to the right people quickly, without lengthy legal processes.
By placing your life policy in trust, you can stipulate to whom you want the proceeds to be paid. A trust controls when the money from the life policy is paid out. This can ensure, for example, children will receive financial support from the money, without having full access to it.
Coddan Ltd can help by offering expert advice in setting up a discretionary trust. We provide a one-stop service for the formation of your trust, whether you wish to protect your assets or pass on your estate to family members.
At Coddan, we are available to discuss any specific issues, no matter how complex they may be. We will discuss our services with potential clients in confidentiality, reviewing any query with an initial conversation in person, or by email, or by telephone, free of charge.