Discretionary Trusts in Wills: How They Work

What a discretionary trust is

A discretionary trust lets the people you trust decide who benefits from your estate, how much they receive and when. Those people are your trustees.

Instead of fixed shares, your will names a group of people who may benefit. Your trustees then use their judgement, guided by a letter from you.

This guide explains how it works and what to weigh up. It is general information about the law in England and Wales, not advice on your own situation.

What your trustees decide

Your will gives your trustees powers. Within the rules your will sets, they can decide:

• who in the group receives money, and who does not, at any given time
• how much each person receives, which need not be equal
• when to pay, from small amounts now to larger sums later
• how to help, such as paying school fees directly or helping with a first home
• how to invest what is left while the trust lasts

They must act together, carefully and in good faith. They must consider everyone in the group and keep proper records. They cannot benefit themselves unless they are also in the group.

Most will trusts also set an end date. By then, the trustees must have shared out everything that is left.

Who can benefit

Your will names the group. It can be narrow or wide. Common choices are:

• your children
• your children and grandchildren
• your partner, children and grandchildren
• other relatives, friends or charities

No one in the group has a right to any particular amount. Each person can only ask the trustees to consider them.

The letter of wishes

A letter of wishes is a private letter to your trustees. It explains what you would like them to do and why. It sits alongside your will, but it is not part of it.

It is not binding. Your trustees should take it seriously, but they can depart from it if circumstances change. That flexibility is the point of the trust.

A good letter of wishes might cover:

• your priorities, such as education, a first home or a fair start in life
• whether you would like shares to end up roughly equal
• anyone who may need extra help, and why
• anyone you would like the trustees to be cautious with, and why

Write it carefully and kindly. The people you mention may one day read it. Trustees can sometimes be asked, or ordered, to share it.

You can update your letter of wishes without changing your will. Our letter of wishes guide has more on what to include.

Why people choose one

• Children at different stages: one child may be at university while another is still at school. Trustees can help each one when it matters most.
• Flexibility: you cannot know today what your family will need in ten or twenty years. Trustees can respond to what actually happens.
• Protecting a beneficiary: money in the trust does not belong to any one person until it is paid out. This can give some protection if a beneficiary divorces, gets into debt or is under pressure from others.
• Tax planning after your death: trustees can sometimes arrange things in a more tax efficient way once the facts are known.

The trade off

The trade off is control. You are handing important decisions to other people. Choose trustees you trust completely, who will work well together and treat everyone fairly.

We recommend at least two trustees. Many people choose a mix of family and someone more independent.

Trustees also take on real work. They keep records, invest the money and may need to file tax returns for the trust. Trusts can also pay tax charges that an outright gift would not.

The tax points in plain words

Your home and the residence nil rate band

The residence nil rate band can add up to £175,000 to the amount you can leave free of inheritance tax. It applies to the value of your home that passes to your direct descendants. These are your children, stepchildren, adopted and foster children, and their descendants.

A home left on a discretionary trust does not qualify. For this allowance, a home left in a trust counts as inherited only in set cases. Examples are a life interest that starts at your death, or an age trust for your own children ending by 25. A discretionary trust is not one of them.

Source: HMRC, IHTM46014: Basic definitions: Inherited (Inheritance Tax Manual) (Updated 7 April 2026), checked October 2026.

There is a way back. Within two years of your death, your trustees can pass your home to your direct descendants. They can do this outright, or on one of those set kinds of trust. The law then treats your will as if it had left the home to them, so the allowance can apply. The amount still depends on the value of the home and the taper for estates over £2 million.

Source: HMRC, IHTM46033: More detailed guidance: Inherited (Inheritance Tax Manual) (Updated 7 April 2026), checked October 2026.

If the home might be sold before your trustees act, the position is more complex and needs advice. Start with a professional consultation. Making mirror wills with your partner? Start your mirror wills.

Charges while the trust lasts

A discretionary trust is a "relevant property" trust. That is HMRC's term for a trust taxed in its own right, apart from the people who may benefit. Two charges can arise:

• The ten-yearly charge: on each tenth anniversary of your death, at a rate of up to 6% of the trust's value.
• Exit charges: when money leaves the trust between anniversaries. The rate is a fraction of the ten-yearly rate, based on how long the money stayed in the trust. In the first ten years, it is worked out from the trust's starting value.

The rate is worked out against the nil rate band available to the trust. That is the nil rate band of £325,000, less two things:

• gifts you made in the seven years before your death that count for inheritance tax. These include gifts into a trust, and gifts to people that were not exempt. What your will itself leaves is not counted.
• any amounts that have had exit charges in the previous ten years

If the trust fund is worth less than the band available to it, the rate works out at 0%. Another trust in your will that is taxed the same way, such as a second discretionary trust, has its starting value added for this test. A life interest trust for your partner is taxed differently and is not added.

Source: HMRC, IHTM42081: Ten year anniversary: introduction (Inheritance Tax Manual), checked October 2026.

Source: HMRC, IHTM42086: Ten year anniversary: the rate of tax: step 2: the hypothetical cumulative total (Inheritance Tax Manual) (Updated 7 April 2026), checked October 2026.

The two-year window

There is a useful rule for will trusts. Your trustees may pay out or rearrange the trust within two years of your death. If so, it is treated for inheritance tax as if your will had said so.

So no exit charge arises on those payments. The family can also take stock of the tax position once the facts are clear. This is why some people leave their estate on a discretionary trust for two years only.

Source: legislation.gov.uk, Inheritance Tax Act 1984, section 144 (Distribution etc. from property settled by will) (Up to date with changes in force on or before 11 October 2026), checked October 2026.

Income and gains

Income kept in the trust is taxed at trust rates, currently 39.35% and 45%, on dividends and on other income respectively. Most trusts pay no income tax on income up to a tax-free amount, normally £500. Gains are taxed at trust rates too. When trustees pay income to a beneficiary who pays less tax, the beneficiary may be able to claim some back.

Source: GOV.UK (HMRC), Trusts and taxes: Trusts and Income Tax, checked October 2026.

The two versions, and how GetWill handles them

A discretionary trust for your own children

This version is part of the standard GetWill will service. The trust is for your children, and any stepchildren you choose to treat as your own. It ends by the time your youngest reaches the age you choose, at 25 at the latest. You leave a letter of wishes to guide your trustees.

Fifty Six Law reviews every will before it is finalised, and our team checks the trust with you. Over £325,000, they also check you are happy with how it is taxed, including the residence nil rate band.

Your will starts with a professional consultation instead if:

• your estate is worth more than £1 million
• it includes a business or farm, or property or assets abroad
• you would like the trust to last beyond 25

If you would rather each child had a fixed share, see our guide to children inheriting at 18, 21 or 25.

A wider discretionary trust

Some trusts need a professional consultation first. These include a trust for a wider family, a two-year trust, a nil rate band trust, and any trust where tax planning matters. So does a trust for a disabled or vulnerable person.

If you and your partner are making mirror wills, you stay on the mirror will service and our team contacts you about the trust. If either of you lives outside the UK, you start with a professional consultation instead.

The consultation is £150, including VAT. It includes a legal professional’s review of your circumstances and advice on the will you need. Afterwards we send you a written fee estimate for your will. If you go ahead, the £150 is deducted from that price.

What to do next

• Thinking about a trust for your own children? Start your will
• Need a wider trust? Start with a professional consultation
• Making mirror wills with your partner: start your mirror wills
• Talk to the people you would like as trustees before you name them
• Start jotting down notes for your letter of wishes
• More about trusts: Trusts in Wills

Last checked against official sources on 14 October 2026.