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Legal Terms - discretionary trust
A trust that grants trustees the discretion to determine the recipients, within a class designated by the settlor, of trust property and the amounts each shall receive. For a trust to be lawful, trustees must ascertain whether any individual is a member of the designated class (the “any given postulant test”; McPhail v Doulton [1970] UKHL 1). A beneficiary of a discretionary trust possesses no actionable entitlement to any portion of the property or its income, as established in Vestey v IRC (No 2) [1979] 2 All ER 225 (HL), Gartside v IRC [1967] UKHL 6, Sainsbury v IRC [1970] Ch 712, and Re Smith [1928] Ch 915.
Discretionary trusts have been crucial in tax liability mitigation; however, current fiscal legislation has significantly diminished their benefits. Discretionary trusts, unless benefiting charities, are now classified as relevant property trusts and incur an inheritance tax liability every decade.
A trust that grants trustees the discretion to determine the recipients, within a class designated by the settlor, of trust property and the amounts each shall receive. For a trust to be lawful, trustees must ascertain whether any individual is a member of the designated class (the “any given postulant test”; McPhail v Doulton [1970] UKHL 1). A beneficiary of a discretionary trust possesses no actionable entitlement to any portion of the property or its income, as established in Vestey v IRC (No 2) [1979] 2 All ER 225 (HL), Gartside v IRC [1967] UKHL 6, Sainsbury v IRC [1970] Ch 712, and Re Smith [1928] Ch 915.
Discretionary trusts have been crucial in tax liability mitigation; however, current fiscal legislation has significantly diminished their benefits. Discretionary trusts, unless benefiting charities, are now classified as relevant property trusts and incur an inheritance tax liability every decade.
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