A nil-rate band discretionary trust is a version of such a trust used in estate planning to reduce liability to Inheritance tax on the death of a surviving joint proprietor.
What is the difference between a beneficiary and a discretionary beneficiary?
The beneficiaries are the people (including entities) for whose benefit the trustee holds the trust property. A discretionary trust usually has a wide range of beneficiaries, including companies and other trusts. The beneficiaries of a discretionary trust do not have an interest in the assets of the trust.
Does a discretionary beneficiary have a beneficial interest?
What rights do the beneficiaries have? The beneficiaries under a discretionary trust have no ‘proprietary interest’ in the trust fund unless the trustees decide on a distribution. This means they do not own the beneficial interest under the trust – merely a hope that they will benefit.
What happens when a beneficiary of a Discretionary Trust dies?
Generally if a beneficiary dies before the deceased, the beneficiary’s gift will lapse (fail) and they will not inherit anything from the deceased’s Estate. Whatever they were due to receive will fall back into the deceased’s residuary Estate to be redistributed.
What rights do discretionary beneficiaries have?
Generally, a discretionary beneficiary has the right to: request from the trust or its representatives, documentation for the trust (i.e. trust deeds, appointment/removal of trustee documents, details of trust distributions, trust accounts, trustee contact details and details of trust assets and liabilities);
Can a trustee be a beneficiary of a discretionary trust?
Can a trustee be a beneficiary under a discretionary trust? Yes, the law allows a trustee to be a beneficiary of a trust – as long as you include the trustee’s name and their capacity.
What happens to a discretionary trust when beneficiary dies?
Yes, with our Discretionary Trust the settlor has the power to appoint additional trustees at any time. After you die, the trustees will have the power to appoint additional trustees. If a trustee dies, the remaining trustees can still carry on with the role, but a replacement could be appointed.
Who are the beneficiaries of a Nil Rate Band discretionary trust?
Under a nil rate band discretionary Will trust, the spouses would in their Wills arrange for £325,000 to be held on a discretionary trust on the first death. The potential beneficiaries of this trust would be the surviving spouse and the children.
Can a Nil Rate Band be transferred between spouses?
Before 9 October 2007, the Nil Rate Band could not be transferred between spouses and so if it was not used on first death (and everything passed to the surviving spouse) this Nil Rate Band was lost unless a deceased spouse had a Nil Rate Band Discretionary Trust within their Will.
How does the Nil Rate Band affect inheritance tax?
The nil rate band goes up year by year, generally speaking, but there is no guarantee that it will always do so. It could be frozen or reduced. Locking in the inheritance tax benefit at the level of the nil rate band on H’s death might therefore be beneficial.
When was the Nil Rate Band first introduced?
Nil Rate Band Discretionary Trusts were popular, and VERY useful, prior to 9 October 2007 when the Transferable Nil Rate Band was introduced.
