Discretionary Trust

 

A discretionary trust serves as a powerful tool in safeguarding and managing assets for the benefit of chosen beneficiaries. This legal arrangement grants considerable flexibility to trustees in determining how and when assets are distributed, providing a layer of protection against various risks and uncertainties.

Asset Protection for Beneficiaries

Think of a discretionary trust like a safety deposit box for beneficiaries - shielding them from potential threats and ensuring their financial well-being.

Protection from Creditors

One of the key benefits of a discretionary trust is that it can shield beneficiaries from creditors. Since beneficiaries do not have a fixed entitlement to trust assets, these assets are generally not considered their personal property and are protected from claims by creditors.

Protection in the Event of Bankruptcy

If a beneficiary faces financial difficulties or declares bankruptcy, assets held in a discretionary trust are protected from being claimed by creditors. This can provide a safety net for beneficiaries during challenging times.

Shielding Assets from Legal Claims

When assets are held in a discretionary trust, they are typically protected from creditors seeking to make a claim against a beneficiary. This safeguard can offer peace of mind and financial security.

Securing Assets in Divorce Proceedings

Discretionary trusts can provide a level of protection for assets in the event of a beneficiary going through a divorce. By keeping assets within the trust, they are shielded from being included in any divorce settlements.

Ensuring Smooth Transfer of Assets

When it comes to estate planning, a discretionary trust can facilitate a smooth transfer of assets to beneficiaries. The trust structure allows for assets to be managed and distributed according to the wishes of the settlor, providing clarity and continuity.

Personal Protection for Beneficiaries

If at the time of your death, any beneficiaries were unfortunately going through any medical difficulties or mental health issues like addiction or gambling, it would not be safe for them to inherit at that time. By using a Discretionary Trust, the trustees could hold their share of the inheritance until such time it was safe for them to inherit. The trustees can still use part of the inheritance to fund treatment or counselling but keep the bulk of the estate safe for them until they are in a better position to inherit. The estate can still be used for their benefit but offers more protection in the event of medical and mental health problems.

By utilising a Discretionary Trust in your Will, you have put in place as much protection as you possibly can for your loved ones ensuring more of your estate passes to them at the right time in their lives.