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    • Katylou65
    • By Katylou65 9th Jul 18, 10:37 PM
    • 3Posts
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    Katylou65
    Discretionary trust
    • #1
    • 9th Jul 18, 10:37 PM
    Discretionary trust 9th Jul 18 at 10:37 PM
    I'm hoping for advice on winding up a discretionary trust set up by my father on my mother's death 9 years ago. Half of the family home was put into the trust with me and my siblings as trustees and beneficiaries. The house has now been sold and half of the value belongs to the trust. We now want to withdraw the money and close the trust paying equally to the four siblings. What taxes or exit payments do we have to make? My father was living in the house until January when he moved into a care home. Thanks for any help.
Page 1
    • Yorkshireman99
    • By Yorkshireman99 9th Jul 18, 10:47 PM
    • 4,504 Posts
    • 3,731 Thanks
    Yorkshireman99
    • #2
    • 9th Jul 18, 10:47 PM
    • #2
    • 9th Jul 18, 10:47 PM
    I'm hoping for advice on winding up a discretionary trust set up by my father on my mother's death 9 years ago. Half of the family home was put into the trust with me and my siblings as trustees and beneficiaries. The house has now been sold and half of the value belongs to the trust. We now want to withdraw the money and close the trust paying equally to the four siblings. What taxes or exit payments do we have to make? My father was living in the house until January when he moved into a care home. Thanks for any help.
    Originally posted by Katylou65
    It will depend on the exact terms of the the trust. You need paid for professional advice from a STEP member.
    • SeniorSam
    • By SeniorSam 10th Jul 18, 7:28 AM
    • 1,177 Posts
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    SeniorSam
    • #3
    • 10th Jul 18, 7:28 AM
    • #3
    • 10th Jul 18, 7:28 AM
    The Trustees can dissolve the Trust if they wish and distribute the assets in accordance with the terms of the Will.

    In some cases, the beneficiaries prefer to retain the Trust, which they can for the remaining 80 years, and simply take out loans against their individual bequest. In such cases, the 'Loan' remains an asset of the Trust and can continue on to others if it is the wish of the beneficiaries and agreed by the Trustees. Therefore the inheritance has not added to the beneficiaries estate, which may help with taxes if they are already wealthy.

    For example, if there were assets of 300,000 in a trust and three beneficiaries (A,B &C) with equal ownership, then perhaps beneficiary A may want all their share, beneficiary B may only want part of their inheritance and beneficiary C may not need their inheritance at this time and could well leave it to grow in the Trust for their own beneficiaries. The Trust can have additional beneficiaries for individual ownership when they die

    Discretionary Trusts are very flexible, but you do need to be clear on the wording of the Trust in case there are any special conditions that have been included.

    Retaining a Trust for many years has always been the way that wealthy families retain that wealth. Please be aware also that the assets of the Trust will determine the tax position of the Trust. If it has 'income' producing assets, then income tax is payable, but if the assets are invested for 'Growth' rather than income, as in Funds for example, then no income tax will be payable.

    A good solicitor that is STEP qualified will be able to advise you further, but if retaining the Trust. the present trustees can continue (ideally two as a minimum), ideally family members as long as they can trust one another, but a 'Professional' Trustees is not essential if the Lay persons can manage the assets themselves.

    I hope this helps you
    Last edited by SeniorSam; 10-07-2018 at 7:33 AM. Reason: itm missed
    I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • Katylou65
    • By Katylou65 10th Jul 18, 10:37 AM
    • 3 Posts
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    Katylou65
    • #4
    • 10th Jul 18, 10:37 AM
    • #4
    • 10th Jul 18, 10:37 AM
    Thanks for that helpful advice. Do you know if payments to beneficiaries are subject to income tax? Are there exit fees from a trust?
    Many thanks
    • Yorkshireman99
    • By Yorkshireman99 10th Jul 18, 12:49 PM
    • 4,504 Posts
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    Yorkshireman99
    • #5
    • 10th Jul 18, 12:49 PM
    • #5
    • 10th Jul 18, 12:49 PM
    Thanks for that helpful advice. Do you know if payments to beneficiaries are subject to income tax? Are there exit fees from a trust?
    Many thanks
    Originally posted by Katylou65
    Same answer. It depends on the terms of the trust. That is why you MUST get professional advice.
    Last edited by Yorkshireman99; 10-07-2018 at 1:52 PM.
    • SeniorSam
    • By SeniorSam 10th Jul 18, 2:50 PM
    • 1,177 Posts
    • 594 Thanks
    SeniorSam
    • #6
    • 10th Jul 18, 2:50 PM
    • #6
    • 10th Jul 18, 2:50 PM
    A bequest from a Will is not subject to income tax by the beneficiary. The passing on of an inheritance by the Trustees to a beneficiary from a Discretionary Trust would not normally attract any exit fees for the beneficiary, but if the Trust assets has been invested, possibly unwisely, then they may be subject to exit fees for encashment, but this would simply reduce the 'net' amount available to be distributed.

    Without knowing what investments are held in the Trust I am unable to offer any more guidance.
    Last edited by SeniorSam; 10-07-2018 at 2:58 PM. Reason: addition
    I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • Katylou65
    • By Katylou65 10th Jul 18, 10:14 PM
    • 3 Posts
    • 1 Thanks
    Katylou65
    • #7
    • 10th Jul 18, 10:14 PM
    • #7
    • 10th Jul 18, 10:14 PM
    Thank you - you've been very helpful and I have a better idea of how these work. I will make sure we get professional guidance before doing anything.
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