Services
Discretionary trusts for families
Discretionary trusts give you the flexibility and control to manage your estate, ensuring your specific wishes and changing circumstances are fulfilled.
Professional discretionary family trust planning
At Mattioli Woods, we offer clear, tailored guidance to help you establish and manage a discretionary trust that reflects your wishes and adapts to your family’s changing needs.
With dedicated specialist support and regular reviews, we ensure your trust remains compliant, well managed and flexible enough to deliver the long-term protection and control you’re looking for.
What is a discretionary trust?
This is a legal arrangement where assets are managed by trustees for the benefit of a group of beneficiaries.
Unlike other trust structures, the trustees have complete discretion over how and when to distribute the trust’s assets, providing unparalleled flexibility in both wealth management and succession planning.
Representing one of the most flexible and tax-efficient vehicles for protecting and transferring wealth across generations, a discretionary trust is a powerful estate planning tool.
Discretionary trusts and Inheritance Tax
Discretionary trusts can be used for Inheritance Tax (IHT) planning, allowing for gifts to be made to a range of people or charities.
A discretionary family trust provides a flexible and protective way to manage and pass on wealth, giving trustees the freedom to support beneficiaries according to their needs while safeguarding assets for the future. This makes it a powerful tool for estate planning, family protection and long-term wealth management.
Key advantages
- Enhanced flexibility Trustees can adapt decisions as family circumstances change, ensuring support goes where it is most needed.
- Tax efficiency When used correctly, discretionary trusts can help manage potential Inheritance Tax (IHT) liabilities and support broader estate-planning strategies.
- Asset protection Assets within the trust are generally protected from creditors, divorce settlements or financial instability affecting individual beneficiaries.
- Family governance Beneficiaries can include children, grandchildren and future family members, with flexibility to adjust as the family grows.
- Professional trustee oversight You can appoint experienced trustees to manage the trust, ensuring decisions are objective, compliant and aligned with your wishes.
- Control over access Trustees can set conditions or delay access for younger or vulnerable beneficiaries, offering additional protection.
- Privacy protection Unlike wills, trust arrangements are not public documents, therefore providing family confidentiality.
- Ongoing compliance costs Trustees must handle TRS registration, tax reporting, and periodic reviews, incurring administrative fees.
Discretionary family trusts can be used in a range of circumstances where the settlor would prefer there to be an element of control over access to the trust property.
This could mean controlling access until beneficiaries reach a certain age or protecting the assets if they face bankruptcy or divorce.
Find out more about why you should use a discretionary trust.
How can discretionary trusts support Inheritance Tax planning?
These trusts can be tax efficient and often help with Inheritance Tax (IHT) planning, as Neil Farndon, Wealth Management Consultant, explains:
“Discretionary trusts allow you to make gifts to a wide range of beneficiaries, including family members and charities. By placing assets or the proceeds of life insurance policies into a trust, these funds may be kept outside your estate, making sure they are protected and available when needed.
These rules can be complex, and the impact will depend on the value of the transfer and your wider estate-planning goals.
Seeking professional advice is essential. An adviser can help you understand the potential tax implications and determine whether a discretionary trust is the right approach for your circumstances.
FAQs
What is a discretionary trust?
There are several types of trusts however, a discretionary trust is a legal arrangement where the assets are managed by trustees on behalf of beneficiaries. Unlike other trusts, the trustees have complete control over how and when they can distribute the trust’s assets. This can provide complete flexibility in both wealth management and succession planning.
Is there a difference between a discretionary trust and a discretionary family trust?
A discretionary trust and a discretionary family trust are essentially the same thing. The word ‘family’ is purely added when the beneficiaries are predominantly family members of the settlor.
The only significant difference is that a discretionary family trust can restrict the pool of potential beneficiaries to family members and their related entities. However, a standard discretionary trust will allow beneficiaries to be friends, employees or even charities.
Who should consider setting up a discretionary trust?
Discretionary trusts are more suitable for those with substantial assets who are looking to protect and preserve family wealth. They can also be used within estate planning for tax reasons, to protect assets for future generations and to maintain flexibility in beneficiary distributions.
What is the trust structure and roles of a discretionary trust?
- Settlor The individual who establishes the trust and transfers assets into it.
- Trustees Any appointed individuals or professional trustees who manage the trust and make distribution decisions.
- Beneficiaries Those who could potentially benefit from the trust.
- Protector (optional) An individual appointed to oversee the trustees and provide additional governance.
Who should you pick to be trustees?
The trustees have control over the trust and making distributions to the beneficiaries, so you should select people who you trust to carry out your wishes.
Do discretionary trusts have legal requirements?
Discretionary trusts are their own separate legal entity and must be registered with the Trust Registration Service and HMRC for tax reporting, if appropriate.
How many trusts can I have at any given time?
There is no limit on the number of trusts an individual can establish, although there are rules relating to reporting and trust-specific taxes, so it’s important the appropriate advice is sought to ensure initial and ongoing compliance.
What assets can be held in a discretionary trust?
A discretionary trust can hold most types of asset that has a value. These could include:
- Property and land such as commercial property, residential homes and agricultural land.
- Financial assets including stocks and shares, cash, bonds, investment portfolios etc.
- Business assets – partnership interests, intellectual property rights and shares in private companies.
- Life insurance policies where the trust is named as a beneficiary.
- Pension benefits (rules will apply), investment bonds and regular income sources such as dividends.
It’s important to note that while most assets can be held in trust there may be tax implications or specific rules. Therefore we always advise you to speak to your financial adviser when looking at a discretionary trust.
Can Mattioli Woods advise me on trust establishment?
Yes, we can provide advice on the trust establishment and ongoing investment management, although we would recommend you receive independent specialist legal advice on the trust itself.
Can Mattioli Woods take over the management of an existing trust?
Yes, provided the trust has been registered with the Trust Registration Service (TRS). If you are already a client of ours, you should speak to your consultant. If you are new to Mattioli Woods, book your free appointment here.
Why choose Mattioli Woods for your discretionary trust planning?
Setting up a trust requires specialist knowledge and our team is here to ensure your arrangements are built around your family's specific needs and long-term objectives.
- Dedicated support team You’ll work closely with a dedicated consultant and client relationship manager, who will oversee your trust and provide regular reviews.
- Straightforward, transparent advice We break down the technical elements of discretionary trusts into simple guidance, with no jargon, giving you confidence to make informed decisions at every stage.
- Specialist expertise With 35 years’ experience and a nationwide team of over 200 advisers, we understand the nuances of discretionary trusts.
- Long-term partnership Our focus is on supporting you throughout the lifetime of your trust. As your circumstances evolve, we work with you to ensure the trust continues to deliver flexibility, protection and effective family governance.
- Client-centred approach At Mattioli Woods, your family’s financial security is our foremost concern. We adhere to the highest professional standards, including the Financial Conduct Authority’s Consumer Duty, to ensure you receive clear guidance and the confidence to make informed decisions.
Get expert guidance on discretionary trusts
If you’re thinking about setting up a discretionary trust to protect family wealth, support future generations or safeguard assets for your loved ones, speak to one of our specialist advisers.
Discretionary trust FAQs
What is the difference between a discretionary trust and a discretionary family trust?
The meaning of discretionary trust and discretionary family trust is essentially the same thing. The word ‘family’ is purely added when the beneficiaries are predominantly family members of the settlor.
The only significant difference is that a discretionary family trust restricts the pool of potential beneficiaries to family members and their related entities. However, a standard discretionary trust will allow beneficiaries to be friends, employees or even charities.
Who should consider setting up a discretionary trust?
Discretionary trusts can be a valuable tool for a wide range of individuals and families. They are particularly suitable for those who want to:
- Protect and preserve family wealth for future generations
- Provide for multiple beneficiaries while maintaining flexibility in how assets are distributed
- Safeguard assets for younger or vulnerable family members
- Include tax-efficient strategies as part of broader estate planning
- Ensure that gifts or insurance proceeds are kept outside of personal estates and readily available when needed
Whether you have significant assets or simply want greater control and protection over how your wealth is used, a discretionary trust can offer a flexible and long-term solution tailored to your family’s circumstances.
Do I still need a will if I have a discretionary trust?
Yes. Even if you set up a discretionary family trust, a will is still important. A will allows you to handle any assets that are not included in the trust, appoint guardians for minor children and provide instructions for how your estate should be managed after your death.
A discretionary trust can form part of your wider estate planning, but it does not replace a will.
How is a discretionary trust set up?
A discretionary trust is established through a structured legal process, involving several key roles that ensure the trust is managed effectively and according to your intentions:
- Settlor The individual who establishes the trust and transfers assets into it.
- Trustees Any appointed individuals or professional trustees who manage the trust and make distribution decisions.
- Beneficiaries Those who could potentially benefit from the trust.
- Protector (optional) An individual appointed to oversee the trustees and provide additional governance.
Who should you pick to be trustees?
The trustees have control over the trust and its distributions to the beneficiaries, so you should choose individuals or professional trustees you trust to act in line with your intentions and exercise sound judgement.
Ideally, trustees should be reliable, financially aware and able to handle complex decisions over the long term.
Do discretionary trusts have legal requirements?
Yes, discretionary trusts are considered separate legal entities and must comply with specific legal and regulatory requirements. They need to be registered with the Trust Registration Service (TRS) in the UK, which ensures transparency and allows HMRC to monitor trusts for tax purposes.
Trustees are also responsible for reporting any income, gains or distributions and ensuring the trust complies with relevant tax laws.
How many trusts can I have at any given time?
There is no limit on the number of trusts an individual can establish, although there are rules relating to reporting and trust-specific taxes. It’s important that the appropriate advice is sought to ensure initial and ongoing compliance.
What assets can be held in a discretionary trust?
A discretionary trust can hold most types of assets that have a value. These could include:
- Property and land such as commercial property, residential homes and agricultural land
- Financial assets including stocks and shares, cash, bonds, investment portfolios, etc.
- Business assets, including partnership interests, intellectual property rights and shares in private companies
- Life insurance policies where the trust is named as a beneficiary
- Pension benefits (rules will apply), investment bonds and regular income sources such as dividends
It’s important to note that while most assets can be held in trust, there may be tax implications or specific rules. We always recommend you speak to a financial adviser when looking at a discretionary trust.
Can Mattioli Woods advise me on trust establishment?
Yes, we can provide advice on the trust establishment and ongoing investment management, although we recommend you receive independent specialist legal advice on the trust itself.
Can Mattioli Woods take over the management of an existing trust?
Yes. We can take on the management of an existing discretionary trust, provided it is registered with the Trust Registration Service (TRS). If you are already working with us, your consultant can guide you through the process. If you’re a new client, you can book a complimentary consultation to discuss how we can support and oversee the trust professionally.
