A child can inherit at 18, but 18 is not always the age at which you would feel comfortable handing over a large lump sum. A discretionary trust for children can give the people you appoint as trustees the flexibility to use an inheritance when it is genuinely needed, rather than paying it outright on a fixed birthday.
For many parents, this is less about controlling a child from beyond the grave and more about providing sensible protection. The right arrangement may help with school costs, university fees, rent, a first home or support through a difficult period. But trusts are legal arrangements with real responsibilities and possible tax consequences, so it is worth understanding what they can, and cannot, do before putting one in your will.
What is a discretionary trust for children?
A discretionary trust is a trust created in your will that comes into effect after your death. Instead of leaving money or assets directly to a child, you leave them to trustees. The trustees look after the trust fund for a group of potential beneficiaries, usually your children and sometimes grandchildren or other relatives.
The key word is “discretionary”. No beneficiary has an automatic right to a set share of the money at a particular age. Within the rules you set out in the will, the trustees decide whether to make a payment, who should receive it and how much should be paid.
For example, imagine you leave £150,000 in trust for your two children, aged 10 and 16. One child may need help with specialist educational support, while the other may later need a contribution towards a deposit. Trustees could take those different needs into account. If you had instead left equal gifts outright at 18, there would be far less room to respond to what actually happens in the years ahead.
This does not mean trustees can simply spend money as they please. They must act properly, consider the beneficiaries fairly, follow the terms of the will and keep suitable records. Their role carries legal duties as well as practical responsibility.
When might a discretionary trust for children help?
A discretionary trust is often considered where parents want flexibility because family circumstances may change. It may be useful if your children are young, if you are concerned about how they might manage a substantial inheritance, or if there are several people whose needs could differ over time.
It can also offer a degree of protection where a beneficiary later faces financial pressures. An inheritance held in a discretionary trust is not usually owned outright by that person before a trustee makes a distribution. That can matter if they are vulnerable to undue influence, have difficulties managing money, are going through divorce or bankruptcy, or receive means-tested benefits. Protection is never absolute, and each situation is different, but the trust can prevent an automatic payout at an unsuitable moment.
Blended families are another common reason to seek flexibility. You may want trustees to be able to support a surviving partner and your children, without deciding now exactly how every pound must be divided. This requires particularly careful drafting, because unclear intentions can create tension between people you hoped to protect.
A trust is not always the best answer. If your estate is straightforward and you are happy for a child to receive a defined amount at a chosen age, a simpler trust or a direct gift may be more suitable. Extra flexibility can also mean extra administration.
Choosing trustees is one of the biggest decisions
The people you appoint will have control of the trust fund, so choose them with care. Many parents appoint two or three trustees, such as trusted relatives or friends. You can also appoint a professional trustee, although they will normally charge for their work.
A trustee should be financially sensible, organised and able to make fair decisions. They should also be capable of dealing with difficult family conversations. Being close to your children is valuable, but it is not the only consideration. A relative with strong views about who deserves what may not be the best person to make balanced decisions for a group of beneficiaries.
It is wise to speak to anyone you intend to appoint before making your will. Explain why you want the trust and the kind of support you hope it will provide. Your trustees will not be able to predict every future need, but knowing your priorities can help them make decisions with confidence.
You should also name replacement trustees. People move abroad, become unwell or simply no longer feel able to take on the role. A will should allow the trust to continue without unnecessary disruption if this happens.
Give guidance without tying trustees’ hands
A discretionary trust works best when trustees have both flexibility and direction. Your will sets the legal framework, while a separate letter of wishes can explain how you would like the trustees to use their discretion.
A letter of wishes is not normally legally binding, which allows it to be updated as your family circumstances change. You might say that education and housing should be considered first, that money should not be paid out simply because a beneficiary reaches a certain age, or that trustees should take account of support already given to one child.
You can also express a hope that the trust should usually continue until your children are older, perhaps 25 or 30. The trustees may then decide to distribute the remaining fund, or keep some money in trust if that is still appropriate under the terms of the will.
Avoid writing vague instructions that pull in different directions. “Treat everyone equally” may conflict with “prioritise support for the child with the greatest need”. Both can be reasonable wishes, but trustees need to know which principle matters most when there is not enough money to do everything.
What about tax and administration?
Trusts can involve more administration than a straightforward inheritance. Trustees may need to open a bank account, invest funds, keep accounts, complete tax returns and obtain advice before making major payments. The cost and effort may be worthwhile for a substantial inheritance or a complex family position, but they should not be ignored.
Discretionary trusts can also have their own inheritance tax and income tax rules. Depending on the value of the trust, how it is set up and what happens during its lifetime, there may be tax charges when assets leave the trust or at periodic points. Special rules can apply to trusts for bereaved children, but they are not automatic and depend on the detailed terms.
This is why a discretionary trust should not be added to a will as a standard clause without considering your estate and family. If you own a business, have significant investments, expect a large life insurance payout or have a child with particular needs, specialist legal and tax advice is especially sensible.
How it fits with guardians and life insurance
If your children are under 18, a trust is only one part of the plan. Your will should also appoint guardians to care for them if both parents die. Guardians make day-to-day decisions about upbringing; trustees manage the money. The same people can hold both roles, but they do not have to.
Think, too, about assets that may not pass under your will. Some life insurance policies are written in trust, and jointly owned property can pass automatically to a surviving owner depending on how it is held. Pension death benefits are often dealt with by the scheme trustees. Your will, insurance arrangements and pension nominations should work together rather than contradict one another.
For an ordinary household, making a will is an important first step. Where a discretionary trust is needed, the wording must reflect your exact intentions and should be prepared with appropriate advice. English Wills can help make the wider process of putting clear wishes in place feel more manageable, but complex trust planning deserves careful consideration rather than a rushed decision.
The best time to think about how your children would be supported is while you can explain your choices clearly. A well-planned will can give trusted people the authority to respond to your family’s real needs, not just the circumstances you can see today.