Most of us would love to have it both ways. Give something away, but keep a say in what happens to it. Help your children or grandchildren now, but make sure it’s not squandered, lost in a divorce, or spent by the age of twenty-one on something you’d rather not think about.
It sounds like wanting your cake and eating it. But with the right planning, it’s genuinely possible – and discretionary trusts are one of the tools that can make it happen.
We’re asked about trusts often, usually by clients who want to pass on property, cash or investments, but who aren’t quite ready to let go of the reins entirely. Here’s what a discretionary trust actually is, when it earns its place in a financial plan, and when it might be more trouble than it’s worth.
What is a discretionary trust?
Strip away the legal language and a discretionary trust is fairly simple. Assets – property, cash, investments – are placed into the trust and looked after by trustees. Those trustees hold the assets for the benefit of a group of beneficiaries, often children or grandchildren, but they decide when and how much each beneficiary receives.
Nobody has an automatic right to the money on a set date. The trustees use their judgement, guided by the wishes of whoever set the trust up, to release funds when it makes sense – perhaps for university, a first home, or simply when a beneficiary is old enough to handle it well.
That flexibility is the whole point. It lets you support the people you care about while building in a layer of protection and oversight along the way.
Why clients consider one
The clients who come to us asking about trusts are usually weighing up the same tension: they want to give something away, but they’re not ready to hand over full control.
A discretionary trust can let you do both. The assets leave your estate for planning purposes, but rather than a beneficiary receiving a lump sum outright, the trustees keep a hand on the tiller. That can matter a great deal if you’re planning for grandchildren who aren’t born yet, setting money aside for school fees over many years, or simply want a safety net in case a beneficiary’s circumstances change – a divorce, financial difficulty, or just being too young to manage a windfall sensibly.
For longer-term goals like these, trusts genuinely earn their place. Many of our clients have some form of trust built into their planning, and for good reason.
The bit that’s easy to overlook
Here’s what doesn’t always make it into the conversation early enough: a trust isn’t a “set it up and forget it” arrangement. Once it’s running, there are ongoing responsibilities that come with it.
Trusts typically need to be registered, and there are tax returns to complete each year. Depending on how the trust is structured, there may be ongoing fees to accountants and solicitors to keep everything compliant and above board. None of this is complicated in isolation, but together it adds a genuine administrative and financial cost that continues for as long as the trust exists.
So when a client tells us they want control, our first question is usually a gentle one: how much control do you actually need?
Is there a simpler way?
Sometimes, yes. If your goal is more straightforward – gifting money towards a child’s house, for example – a trust might be more machinery than the situation calls for. Money given directly, or held in a simpler arrangement, can achieve much the same outcome with far less ongoing cost and complexity.
This is exactly the kind of conversation we have with clients before recommending anything. Trusts are a brilliant tool for the right job, but they’re not the only tool, and using one when a simpler option would do just adds cost and admin for no real benefit.
Where trusts genuinely shine
That said, there are situations where a discretionary trust is hard to beat:
- Providing for grandchildren whose needs and circumstances you can’t yet predict
- Setting money aside for school fees over a number of years
- Protecting an inheritance from being lost to a beneficiary’s divorce or financial difficulty
- Passing on wealth gradually, with trustees able to respond to changing circumstances
In these longer-term situations, the ongoing running costs are a small price for the flexibility and protection a trust provides.
The bigger picture
A trust is rarely the whole plan – it’s usually one part of a wider strategy that might also include gifting, pensions, and other estate planning tools working together. The right combination depends entirely on your own family, your goals, and how much involvement you want to keep.
That’s really the heart of it. Trusts can give you both the giving and the control you’re after – but only when they’re the right tool for what you’re actually trying to achieve. Get that judgement right, and a trust can be one of the most valuable pieces of a family’s long-term planning. Get it wrong, and you’re paying for complexity you didn’t need.
It’s also worth saying that a trust set up today doesn’t need to be the final word. Circumstances change – grandchildren grow up, family situations shift, tax rules move on – and a good plan is reviewed regularly rather than left to look after itself. Part of our role is keeping an eye on that over the years, so the structure you put in place still makes sense a decade or two down the line, not just on the day it was signed.
If you’re weighing up whether a trust makes sense for your family, it starts with a cuppa and a chat – no obligation, no jargon, just an honest look at what would actually work for you.
