Discretionary Trust of Residue

For the general law, see Understanding trusts.

What it is#

The trustees hold the whole residuary estate on a wide discretionary trust for a class of beneficiaries. No beneficiary has a fixed entitlement: the trustees decide who benefits, when, and how much, entirely at their discretion, for as long as the trust runs. While no decision is made the income can be paid out or rolled up, and when the trust period ends anything left passes to the descendants.

It's the most flexible option, and the strongest for protecting the fund against a beneficiary's divorce, bankruptcy or care-fee assessment. In return it carries the trust's own ten-yearly and exit inheritance-tax charges.

Who it suits#

• A client who wants to leave things to the trustees' judgement rather than fixed shares.
• Families where circumstances may change, or where a beneficiary needs protecting from their own or others' financial risk.
• The second-death trust on a couple's mirror wills (this is the "RNRB DT").

Which will it goes in#

• Single will - as the main trust over the residue.
• Mirror wills - as the second-death trust (over the survivor's estate).

You can add it as an order line ("Discretionary Trust of Residue"). Because the residue is held on the trust, the will doesn't also ask you to fill in a separate residue split - the trust's beneficiaries list does that job.

Because it's discretionary, the will doesn't impose the usual 28-day survivorship condition - there's no individual with a fixed interest for it to apply to.

What you'll set on the form#

Trustees and beneficiaries#

The standard trustee and beneficiary settings apply - see the shared settings. This trust uses the simple "use the will's default trustees / name its own" choice.

Remember: percentage shares on the beneficiaries list are informational only here. A discretionary trust has no fixed entitlements, so any intended split belongs in the Letter of Wishes.

Trust structure#

Setting	Choices	Default	What it does
Trust structure	Discretionary trust of residue · Nil rate band discretionary trust	Discretionary trust of residue	Residue = the trustees hold the entire residuary estate. Nil rate band = only the largest sum that can pass free of inheritance tax is held on the trust, and the rest of the estate falls into residue and passes under the residuary gift.

If you want a dedicated first-death carve-out (with the extra "what to ringfence" and "only if the spouse survives" choices), use the First-Death Capped Trust instead.

Tax options (all on by default)#

Each is a "power, not an obligation", so it costs nothing to include even where it can't apply - which is why they default on.

Setting	Default	What it does
RNRB section 144 read-back	On	Lets the trustees pass a home to your children or grandchildren within two years of death so the estate can claim the residence nil rate band.
Transferable nil rate band	On	Claims any unused nil rate band carried over from a spouse or civil partner who died first (always relevant on a second death).
Taper mitigation (estate over £2m)	On	Lets the executors top up charitable gifts to bring a large estate below the £2 million threshold at which the residence nil rate band starts to disappear.

Providing only for children#

To leave the residue only to your children and their descendants, set this trust's beneficiaries to your children and their issue - there is no separate product to add.

Good to know#

• The residue split is not fixed in the will for this trust - record who you'd like to benefit, and how, in the Letter of Wishes.
• On mirror wills, if you're using different trustees for each will and this trust names its own trustees, you'll be asked for both spouses' trustee sets.