The cost of setting up a discretionary trust can vary depending on the client’s exact requirements, and whether the trust is created in lifetime or on death. Most solicitors (including JMW) will offer a free consultation and proposals, and a fixed free cost to create the trust together with any ancillary documents required.

A professional wills, trusts and estate solicitor will help you to avoid making mistakes that could prove costly and time-consuming to resolve in the future.

JMW has created the following guide to discretionary trusts to outline the process required to set one up and what the trustee’s responsibilities will be over the course of the trust’s lifespan.

How to Set Up a Discretionary Trust

The first step in setting up a trust should be to seek advice and guidance from a professional solicitor who can take you through the entire process. Your solicitor will be responsible for all of the legal work relating to the trust’s creation, and will explain exactly what you need to do and how to do it.

You will need to appoint other trustees to manage and oversee the distribution of your trust’s assets. These should be people you can trust with the responsibility who will be able to carry out their duties over the lifespan of the trust. If you are planning for the trust to carry on after your death, you should make sure the trustees will be able to continue managing it after you die.

What are the Responsibilities of a Trustee?

Trustees will decide when and how the beneficiaries receive the value of the discretionary trust. Until this time comes, the trustee must maintain the contents of the trust and make sure that it complies with HMRC’s tax laws. To learn more about how to reduce income taxation on trusts, read our guide here.

When the trust is being set up, trustees should make sure they read the trust document thoroughly so they understand all of its contents and what is expected of them. This includes understanding the purpose of the trust so they can better act in the interests of the creator (known as the “settlor”) and beneficiaries. If the trustees do not understand any part of their responsibilities or the contents of the trust, it is their duty to seek professional advice from a solicitor.

Legally, trustees must act with honesty when dealing with the trust, and keep records of any actions that are taken. They must also be skilled enough in the process of organising the trust’s affairs, otherwise, they should not accept the responsibility of acting as a trustee.

The value of a trust may decrease over time, and it falls on the trustees to invest the trust’s assets appropriately to avoid this from happening. If the trustees fail to do so properly, the value of the trust will decrease, resulting in money lost for the beneficiaries. Again, trustees should seek the assistance of professionals before attempting to invest any of the assets of the trust.

If a trustee goes against the terms stated in the trust document, they may be liable for legal action from the settlor or beneficiaries.