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Discretionary Will Trust

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  • Discretionary Will Trust

    Hello everyone,

    Please forgive me if Iím asking any silly questions but I am a trustee for my late motherís will trust and a little confused about what I need to do.

    A bit of background:

    My mum set up a will, leaving the cash residue of her estate to be split in three equal shares:

    1/3 to myself, 1/3 to my brother and 1/3 to a Discretionary Will Trust (my sister is the beneficiary).

    Essentially, it was decided to leave my sisterís share to a discretionary trust as she is a full time carer for her disabled son and as such receives means tested benefits.

    When my mum passed away, the moneys were distributed by our solicitor and a trust bank account was set up by myself and the other trustee in the name of the discretionary trust. The 1/3 share (around 40k) was distributed to the trust account, where it sat until needed.

    It was my mumís intention (outlined in her letter of wishes) that the money would be drip fed to my sister when needed, bearing in mind her position as a full time carer for her son and on means tested benefits. As such, a significant proportion of the money has already been distributed to make improvements to her house, etc.

    We have kept records of money paid and what it was for, etc.

    What Iím unclear about is when and how the trust has to be registered with HMRC?

    Iíve also read about tax but am confused as what is classed as ďincome.Ē I understand that trust money is often invested and as such there may be an income from it, but thatís not the case in our situation. Am I right in saying that the only ďincomeĒ is from interest generated by the bank account? There was no inheritance tax payable on the estate if thatís applicable.

    I am confused and got myself into a bit of a pickle reading about it all. The more Iíve read the more confused Iíve become!

    Thank you.
    Tags: None

  • #2
    It's ok. to be confused about trusts, the rules on registration all changed over the last years. If the trust is just some cash in a bank account and the income (from interest for example) us under £100. you never need to register it with HMRC. If you have more than £100 income tax liability in a tax year. i,e £500 of interest would be liable for 20% tax of £100. you need to register the trust by the flowing October. this page explains it well. https://www.gov.uk/trusts-taxes/registering-a-trust

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