Postby AGoodman » Tue Sep 22, 2020 12:31 pm
The most tax efficient is a bare trust because income will only be taxed at the children's marginal rates.
The downside is that they could (in theory) demand the trust fund when they turn 18.
A discretionary trust gives you the additional control to keep the funds in trust but there will be additional tax - e.g. the trust pays an initial 45% income tax which can only be reduced if the income is distributed (paying school fees should count as a distribution). If the value is over £325,000 (under current rules) there will be a charge of 6% of the excess once every 10 years.
There are also SDLT consequences - e.g. the trust will pay the additional 3% rate, although I think that may be the case for a bare trust as well if you own a property (because your ownership is imputed to the children) You'd need to check that.