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Where Taxpayers and Advisers Meet

A discretionary Trust can new benaficiaries be added?

neil123
Posts:7
Joined:Thu Jun 30, 2022 12:10 pm
A discretionary Trust can new benaficiaries be added?

Postby neil123 » Tue Aug 09, 2022 11:01 pm

Hello Forum

Now had confirmation from the solicitors who took on the closed firms clients that my late wife Will created a Discretionary Trust.
The Will says the Step 1 provisions apply as long as they do not conflict with the beneficial provisions of the Will.

Do Step 1 provisions give the trustees the power to add or remove beneficiaries?
I have had a look at Step 1 Provisions 1 and can not see anything specific saying power to add beneficiaries.
There is this vague
"Ancillary powers
The Trustees may do anything which is incidental or conducive to the exercise of their functions."

Failing this can the Trustees be given this power if all the current living beneficiaries agree?
And is it important that this power to add beneficiaries if possible is given to the trustees within 2 years of passing, so treated as made by the deceased?
I am finding it hard to get concrete answers from a solicitor.

regards
Neil

AGoodman
Posts:1734
Joined:Fri May 16, 2014 3:47 pm

Re: A discretionary Trust can new benaficiaries be added?

Postby AGoodman » Thu Aug 11, 2022 12:21 pm

A power to add beneficiaries should be a clear express provision in the Will and it is unlikely to be there. It isn't contained in the STEP provisions.

You can probably only add beneficiaries with the consent of all beneficiaries (alive and not yet born) so if the class of beneficiaries includes children or unborn descendants, that is unlikely.

It may be better to take a step back and identify what exactly you are trying to achieve (i.e. why add a beneficiary) in case it can be achieved in another way. If the trust is only there for tax purposes then it may be worth just distributing the whole trust fund to you within 2 years (most of the benefits of nil rate band discretionary trusts fell away when the law was changed in 2007). You can then make your own arrangements as you wish.

neil123
Posts:7
Joined:Thu Jun 30, 2022 12:10 pm

Re: A discretionary Trust can new benaficiaries be added?

Postby neil123 » Fri Aug 12, 2022 3:00 pm

Thank you for explaining
The beneficiaries do include grandchildren who do not exist and are unlikely to exist in the future
but the mere possibility of them possibly existing prevents adding new beneficiaries.
And there is no express power anyway in the Will.

If a discretionary trust did give Trustees the power to add a beneficiary after the death could this have tax consequences for the trust beneficiaries if they remain beneficiaries?
Would the power itself on its own cause possible tax consequences?
Or only if the power to add a beneficiary was exercised by the Trustees after death would there be possible tax consequences?
I am guessing the current trust beneficiaries may be seen as the people adding the new beneficiaries not the trust/deceased.

As I was thinking of updating my will with the power to add beneficiaries after death.

Neil


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