What is a discretionary trust?
A discretionary trust is a way of looking after property or money.
As sole trustee, we have complete discretion about how assets are used in the trust. Each trust fund is invested or used to provide things that will make a difference to the person’s life.
Mencap Trust Company has just under 1,000 discretionary trusts. Over 240 are active. That means we hold funds in trust. The funds held are used to help each beneficiary, either by being invested for the future, or by paying for extras to make life better.
Who can set up a trust?
Anyone can set up a trust. The majority of whom are parents, but we also have grandparents, siblings, aunts, uncles, other family members and friends. Anyone setting up a trust is called a ‘settlor.’
The 740 plus trusts are like carefully crafted, empty, buckets. We also ask the person setting up the trust to fill out a letter of wishes, this is a letter about the likes of the individual they’re setting the trust up for – and how best the trust should be used. The trust can be named in their will, so an inheritance can be given, not directly to the recipient, but to the recipient’s bucket.
Why set up a trust?
Unlike many other trusts, a discretionary trust fund allows you to make financial provision in a way that does not affect means tested benefits. It is a way of looking after a property or money so it can help a person who is not able to look after the assets for themselves. Therefore, your child, or their deputy, will not be responsible for the money you give to the trust, Mencap Trust Company will be. This can help protect your child from exploitative, so called, friends. We work with you and your loved ones on how best to use the trust.
Our youngest beneficiary is 1 years old, putting plans in place is especially helpful when grandparents and extended family want to make provision for children.
Lots of families make their plans as their child reaches adulthood. A grandparent leaving a gift directly to their loved one could affect that person’s entitlement to means tested benefits. The grandchild could lose their benefits and access to a support package that has been carefully built up. Once the money is spent and the person qualifies again, the support package is renegotiated, often from scratch. A grandparent placing this gift in to a discretionary trust, stops this happening.
Mencap Trust Company works with beneficiaries for the whole of their life, we have beneficiaries all ages:
- 10% of trusts are for people under 18
- 30% of Mencap trusts are for people ages 18 to 30
- 55% of Mencap trusts are for people aged 30 to 65
- 5% of our beneficiaries are over 65, they all have active trusts.
So when is the best time to set up a discretionary trust?
If your child is very young you will know you have the right structure in place. You will also give extended family and friends the opportunity to make a gift to your child without placing them at a disadvantage later in life.
If your child is an adult you will lessen your own worry by making plans. Setting up a trust means you have a good idea of what will happen when you are no longer around.
Mencap Trust Company Ltd has provided a specialist trust service for people with learning disability and autism for over 40 years. To see if we're the right choice for your family, please look at our web pages or call the Trust Office on 020 7696 6932.