Discretionary Trusts

If you have been diagnosed with a brain tumour, or are caring for a person with a brain tumour, a discretionary trust allows you to ensure that, whatever your circumstances, a part of what you own will go towards the future benefit of your loved ones.

What is a discretionary trust?

Similar to writing a Will, a discretionary trust is a legal arrangement which allows you to distribute what you own for the benefit of your loved ones. However, there are some important between a Will and a discretionary trust.

A discretionary trust allows you to set aside assets (trust fund) and are controlled by trustees, whom you appoint. In the event of your death, the trustees have the right to decide when and how the trust fund will be used to benefit your chosen beneficiaries.

Once you have created a discretionary trust, it is highly unlikely that you would be able to cancel it or to revoke any assets placed in it. They are under the management of appointed trustees whose legal responsibility is to use the trust fund for the benefit of the beneficiaries.

Why would I want to make a discretionary trust?

  • If your beneficiaries are underage. Making your children or underage dependents, beneficiaries of a discretionary trust, ensures that trustees will be using any income from the trust to cater for their needs.
  • If you are caring for someone with a disability. Naming a person as a beneficiary can help fund towards their care, treatment and general well-being. It can also be accessed quicker than a Will, which means the trustees can pay for care immediately.
  • To accommodate changes in circumstances. A discretionary trust can be flexible in that the trustees can determine how the money is best used. For example if it was set up for your children's education and one of them becomes seriously ill, it can be used for treatment and care instead.
  • To accumulate income for your beneficiaries. Trustees can decide to invest the money in assets that become part of the trust and you can also generate income for example by investing in property and charging rent.

Who can I choose as my trustees and beneficiaries?

It would be advisable to appoint at least two trustees in case one of them is unable to carry out their role in the future. You can choose anyone as a trustee as long as they are over 18 and capable of making their own decisions.

Given the importance of the role, you might want to appoint an independent trustee in the form of a solicitor and/or accountant - although it should be noted that they would have to pay for their services.

Anyone you choose could be a potential beneficiary, although you must choose more than one.

How do I make a discretionary trust?

A discretionary trust is a somewhat complex legal arrangement and you should ask your solicitor to produce it for you.If you don't have a solicitor in mind it is worth looking around for the best rates. The rates charged by different solicitors for this type of service may vary according to the complexity of the trust.

For the discretionary trust to be set up you will need to have the following documents and signatures:

The discretionary trust deed

This legal document creates the trust and contains all the details about who is involved in the trust, what their role is and which assets are being put into the trust. The trust deed will specify what kind of decisions trustees will be allowed to make. To be valid, the trust deed must be signed by you (the settlor) and the trustees.

The letter of wishes

The letter of wishes allows you, the settlor, to express how you would like the trust fund to be used by the trustees. Trustees can use the letter of wishes to guide their decisions, however, this is not a legally binding document, so trustees are not required to abide by it. This allows the trustees the flexibility to use the trust fund according to changes in the beneficiaries' circumstances after your death – changes in circumstances you might not have foreseen when expressing your wishes.

Documents relating to your assets

You will need to have any documents which prove the existence and ownership of the assets you want to include in the trust. For example, if you are putting property in the trust, you will have to provide documents which show that the property exists and belongs to you.

Page last reviewed: 11/2015
Next review due: 11/2018

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