Discretionary Trust in a Will UK (2026): How It Works, Tax Implications & When You Need One
Quick answer
A discretionary trust in a will lets trustees decide who among a class of beneficiaries gets what — and when. No beneficiary owns assets outright, which protects against divorce, bankruptcy, and care home means-testing. The trade-off: a 10-year periodic IHT charge (up to 6%), ongoing administration costs, and a residence nil-rate band trap if the family home goes into trust. Most people with straightforward estates do not need one.
What is a discretionary trust in a will?
A testamentary discretionary trust is created inside a will. Instead of leaving assets directly to named individuals, you direct the executor to transfer specified assets into a trust on death. A group of trustees then holds those assets for a class of potential beneficiaries — typically family members — and decides how to distribute them.
The key feature is the discretion: no beneficiary has a fixed right to any particular amount or timing of distribution. Trustees can pay income, make capital distributions, or accumulate within the trust, responding to what is most appropriate given each beneficiary's circumstances at any given time.
How a discretionary trust works: the key parties
| Role | Who they are | What they do |
|---|---|---|
| Settlor | You (the person writing the will) | Creates the trust by writing it into the will; sets the class of beneficiaries and trustee powers |
| Trustees | Named in the will — family, friends or professionals | Hold legal title to trust assets; make distributions; file trust accounts and IHT returns |
| Beneficiaries | A class named in the will — e.g. 'my children and grandchildren' | Potential recipients of distributions; no fixed entitlement; cannot demand assets from trustees |
| Protector (optional) | Named individual with oversight power | Can remove and replace trustees; useful if no family member is neutral enough to be a trustee |
When a discretionary trust in a will is genuinely useful
Vulnerable beneficiaries
If a child or adult beneficiary has a disability, addiction problem, mental health condition, or is in a controlling relationship, leaving them assets outright may harm them. Trustees can manage distributions in their best interests — funding care without handing over a lump sum.
Minor children
Children under 18 cannot own property outright — any inheritance is held by their guardian until 18 or managed by the court. A trust lets you control when they receive their share (e.g. at 25 instead of 18) and how trustees manage it in the interim.
Blended families
A discretionary trust can ring-fence assets for your children from a prior relationship, while allowing a surviving spouse access to income if needed. This avoids the risk of a new spouse inheriting everything under a simple mirror will.
Protection from creditors or divorce
If a beneficiary is at risk of bankruptcy or divorce, assets in a discretionary trust are not theirs — they cannot be seized by creditors or included in divorce proceedings. Distributions are made at trustees' discretion when circumstances change.
Care home means-testing
Trust assets are not automatically included in care needs assessments — but only if the trust was not created to deliberately avoid care fees. Trusts set up for other genuine reasons provide more protection than last-minute gifts.
Inheritance tax implications: the 2026 position
Discretionary trusts have their own IHT regime — separate from the estate of the testator and separate from the beneficiaries.
| IHT event | When it applies | Rate / basis |
|---|---|---|
| Entry charge | On creation — if trust assets exceed the available nil-rate band at death | Up to 40% on the excess above the nil-rate band |
| 10-year periodic charge | On every 10th anniversary of the trust | Up to 6% of the trust value above the available nil-rate band |
| Exit charge | When assets leave the trust (distributed to beneficiaries) | Proportional rate based on time since last 10-year charge |
The residence nil-rate band trap
If your home goes into a discretionary trust on death, your estate loses the residence nil-rate band (up to £175,000 in 2026/27). The RNRB requires the property to pass directly to descendants, or into a specific type of trust (immediate post-death interest trust, bereaved minor's trust, or 18-to-25 trust). Putting the family home into a discretionary trust to save IHT can therefore increase IHT by £70,000 (40% × £175,000) — the opposite of the intended effect.
Do you actually need a discretionary trust?
For most people in England and Wales with straightforward estates and competent adult beneficiaries, a discretionary trust adds complexity and cost without proportionate benefit. A well-drafted will leaving assets directly to beneficiaries — with clear fallback provisions for minors, substitute beneficiaries, and a letter of wishes — achieves most of the same goals more simply.
| Situation | Standard will sufficient? | Consider a trust if… |
|---|---|---|
| Two competent adult children as beneficiaries | Yes | One has addiction, disability, or bankruptcy risk |
| Minor children | Partial — age-contingent gifts solve this in most cases | Estate is very large or children have special needs |
| Spouse as sole beneficiary | Yes — or mirror wills | Second marriage / blended family dynamic |
| Estate under nil-rate band (£325,000) | Yes | Rarely — trust costs outweigh benefits at this level |
| Estate over £1M with children | Possibly — seek advice | Yes — trust can help manage 10-year periodic charge |
If you conclude a discretionary trust is right for your situation, a specialist solicitor or chartered financial planner is essential — the tax rules are too complex for DIY drafting. WillSafe UK will kits are designed for straightforward estates without trust provisions.
For most WillSafe UK customers, the right combination is: a clear will (£39.99), a letter of wishes (£19) explaining how you want assets managed for young beneficiaries, and an age-contingent gift clause (e.g. "to my children at age 25") — which achieves similar flexibility for younger beneficiaries without the trust's ongoing tax and administration burden.
Frequently asked questions
What is a discretionary trust in a will?▼
A discretionary trust (sometimes called a flexible trust or will trust) is a legal arrangement created in your will where assets are held by trustees for a defined class of beneficiaries, but no individual beneficiary has a fixed entitlement. The trustees decide who receives income or capital, when, and how much — giving them flexibility to respond to beneficiaries' changing circumstances after your death.
How is a discretionary trust in a will different from leaving assets directly?▼
Leaving assets directly gives beneficiaries immediate ownership — they can do what they want with them and the assets form part of their estate for IHT purposes. A discretionary trust keeps assets in trust: beneficiaries do not own the assets outright, which protects them from bankruptcy, divorce settlements, and means-testing for care home fees. The trustees retain control and can adapt distributions over time.
Does a discretionary trust in a will save inheritance tax?▼
It can, but the tax treatment is complex. Assets in a discretionary trust face a 10-year periodic charge (up to 6% of the trust value every 10 years) and an exit charge when assets leave the trust. However, trusts can be used to hold assets outside beneficiaries' estates, pass assets to multiple generations, and give trustees flexibility to distribute when tax is most efficient. For most people, the IHT saving is secondary to the flexibility and protection benefits.
Can a discretionary trust protect an inheritance from a care home?▼
Potentially — but only if it was not set up specifically to avoid care fees. If a local authority can show a discretionary trust was created with the deliberate purpose of depriving a beneficiary of assets for means-testing, the trust assets can be included in the assessment. Trusts created genuinely for other reasons (vulnerable beneficiary, minor children, IHT planning) are harder to challenge.
Who should be the trustees of a discretionary trust in a will?▼
Trustees need the same qualities as a good executor: trustworthy, organised, and preferably younger than the testator so they outlive you. You can appoint beneficiaries as trustees (common for spouse/children), professional trustees (solicitors, trust companies — who charge fees), or a combination. A minimum of two trustees is strongly recommended so one cannot act alone without oversight.
How much does a discretionary trust will cost?▼
A will containing a discretionary trust is more complex than a simple will and costs more to draft — typically £300–£800+ via a solicitor or specialist will writer, compared to £39.99–£89.99 for a standard WillSafe UK will kit. Ongoing trust administration (annual accounts, periodic charge calculations, trustee decisions) adds professional fees of £500–£2,000+ per year. For most people with straightforward estates, the costs outweigh the benefits.
Does a discretionary trust in a will affect the residence nil-rate band?▼
Yes — this is a critical trap. If you leave your home into a discretionary trust (rather than directly to descendants), your estate may not qualify for the residence nil-rate band (up to £175,000 in 2026/27). The RNRB requires the home to pass to direct descendants (children, grandchildren) either outright or into an immediate post-death interest trust. Taking specialist advice before using a discretionary trust for a property is essential.
Start with a will that covers the essentials
For most estates, a clear will with fallback provisions and a letter of wishes achieves more than a complex trust — at a fraction of the cost and administration. Write yours today.
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This article is for general information only and does not constitute legal or tax advice. Discretionary trust wills involve complex IHT rules — always take specialist advice before including trust provisions. WillSafe UK will kits do not include discretionary trust provisions. WillSafe UK is not a firm of solicitors. Last reviewed 13 May 2026.