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Discretionary Trust for DC

(12 Posts)
Auti Tue 12-Jul-16 11:03:42

My DC's grandmother wants to gift money to them.

She wants to put the money in a Trust and then transfer control of the Trust to DH.

Does anyone have any experience of Discretionary Trusts?
The tax implications look confusing to me.

MsStricty Tue 12-Jul-16 11:21:13

I'm the beneficiary of a discretionary trust. Yes, the tax implications are complex and in a constant state of flux - you will need a very good accountant (PM me if you want about that).

Having been a beneficiary for some time now, and well into adulthood, I would say there is a damaging element to it if it continues beyond 18 - there certainly has been for me. There is a part that is never fully able to grow up and exercise as much autonomy as is expected of an adult. Some may say this is looking a gift horse in the mouth, but things are more subtle than that when the gift is conditional - especially given that the reason there are discretionary trusts is because the beneficiaries are deemed not entirely trustworthy.

Auti Tue 12-Jul-16 11:52:06

Thanks MsStricty.

I think DH and his mum want the money be used responsibly eg for paying uni fees or deposit for a house. He feels 18 would be way to young to hand a lot of money to our DC.

How long have you had to wait?

Because the rules are complex for a discretionary trust would it be simpler to transfer the money to DH who would save it for when the DC needed it?

riksti Tue 12-Jul-16 11:58:20

If your DH is a higher earner then there would be a tax loss associated with giving the money directly to your DH as any income generated would be taxed on him, not the children. There may also be inheritance tax implications but those are difficult to comment on without knowing the family circumstances. Plus, the trust would protect the assets, something giving cash to your DH wouldn't do.

Auti Tue 12-Jul-16 12:07:37

the trust would protect the assets, something giving cash to your DH wouldn't do.

Thanks riksti.

So tax would have to be paid either way. Sorry I don't know much about taxation.

I guess circumstances do change and the best way to make sure they get their money, is a Trust.

MsStricty Tue 12-Jul-16 12:28:11

How about you go and speak with a trust accountant before making any decision - they will be able to advise. Again PM me if you want some info.

I never have autonomy over the money. It is a welcome, if double-edged and sometimes very sharp, sword.

Auti Tue 12-Jul-16 12:40:11

Thanks again MsStricty smile

I will show DH this thread.
He may PM you when he has had a little more time to consider things.

Lonecatwithkitten Tue 12-Jul-16 14:16:24

I have a discretionary trust set up for my DD that comes into action if I die. It acts until she is 25, so it is possible to go beyond 18, but not whole of life.

MsStricty Tue 12-Jul-16 15:05:30

It can go on for the whole of life, Lonecat - because mine does. The money outlasts me, even if the trust has to be restructured, and is subsequent passed on to whichever successors the Protectors and Trustees deem to be nominated as such.

MsStricty Tue 12-Jul-16 15:05:45

*subsequently

Lonecatwithkitten Tue 12-Jul-16 21:27:13

Sorry Ms Strictly yes I do understand that my point was that it possible to have one that last beyond a 18, but not whole of life sorry if I didn't make that clear.

DiddlySqeak Wed 13-Jul-16 10:17:06

Our 4 DC have received large pots of money at 18. We decided to give it to them with no strings attached. If they waste it then that's their decision. They are all adults and not one has touched a penny. They all act as though it's not there. DH and I think it makes them work even harder at Uni etc as they want to prove they aren't spoilt. They all get summer jobs and scrimp and save but have the pleasure of being financially secure. It's satisfying.

We have slowly been giving the kids money to avoid higher rate tax and inheritance tax.

Would your MIL consider simply giving the money directly (depends on her age etc)

My Mum has a discretionary trust - there has been a lot of money wasted on the trustees fees and it's been badly managed over the years.

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