are sometimes set up to put assets aside for a future need, like a grandchild who may be deserving of more financial help than other beneficiaries at some point in their life, or beneficiaries who are not capable or responsible enough to deal with money themselves.
Possibly the portion of the current statute that provides that a creditor of a discretionary trust
may not "attach or otherwise reach" was considered by the committee to be clear enough to protect the intended beneficiaries of discretionary trusts
even from exception creditors.
In the case of a non-domiciled UK resident or an individual investing through a jurisdiction that uses trusts for tax mitigation, a discretionary trust
will be set up in an offshore jurisdiction, with a separate holding company as its primary asset.
He added: "There is no individual owner, that's the nature of discretionary trusts
- it's a perfectly legal and much-used ownership structure in many different industries, not just football."
If this would leave your spouse in financial difficulty, Ms Talbot suggests you both incorporate a nil-rate band discretionary trust
into your will.
Creditor protection is at its greatest in a discretionary trust
because the beneficiary is not entitled to receive distributions and is also unable to control the decision-making process about who may receive distributions.
His assets, which included a pounds 1million house in London and a villa in the south of France, were hidden in a web of discretionary trusts
and offshore shelf companies to avoid tax.
A way round this problem involves the use of Discretionary Trusts
and provides a method of using up the individual allowances whilst ensuring that the spouse can receive an income from the money before it eventually passes on to the children.
To generate a CPT, property must be capable of being valued using normal valuation techniques and have a value greater than zero.(8) Thus, the courts have found that the CPT is not available in life estate situations involving simultaneous deaths, because the life estate has no value in the transferor's estate.(9) Discretionary trusts
can also present valuation problems; the Service has ruled that a life estate cannot be valued if the trustee has the absolute discretion to either pay out trust income to the income beneficiary or to accumulate it.(10)
Congress has passed legislation making inter vivos (lifetime) transfers to discretionary trusts
available to the beneficiaries of such trusts.
For discretionary trusts
, anything in excess of PS1,000 is taxed at 38.1 per cent for dividends and 45 per cent for other income.
For those who are contemplating making more substantial gifts, but may have concerns about the ultimate destination of assets or wish to protect assets from young or inexperienced beneficiaries, the use of nil rate discretionary trusts
" during lifetime or through their wills can play an important role.
Distinction Between "Spendthrift Trusts" and "Discretionary Trusts
Capital Gains Tax (CGT) can also be applicable at a rate of 28% and for discretionary trusts
, Periodic and Exit Charges could also be applicable.
There has been much debate about whether Nil-Rate Band Discretionary Trusts
should be retained.