A recent talk given by Professor Lesley King raised a few options for dealing with Discretionary Trusts in Wills, i.e.
Keep the Trust in place but for simplicity and tax efficiency look at preparing a Deed to earmark the income for one particular beneficiary, usually the spouse.
Appoint all of the discretionary fund out of the Trust, usually to the surviving spouse via Deed of Appointment within a two-year period of death, thus getting rid of the discretionary trust.
She then said there was of course a third way - to appoint the discretionary fund out to a new IPDI settlement instead which of course would retain the asset protection element should the survivor need social care AND ensure the NRB can be transferred on death of survivor and RNRB can be claimed.
Professor King somewhat glossed over this third option but surely it is the best one? I would be very interested to hear what other practitioners do when dealing with this issue?
And just a second point about IPDIs - where a survivor is entitled to whole of first estate absolutely (no trust) but tries to vary to include an IPDI thinking this could minimise the impact of care fees, this would be seen as deprivation of capital.
I’m right in thinking there would be no deprivation if there was a deed of appointment out of a discretionary trust to a new IPDI would there? The assets have always remained in the trust, were never the surviving spouse’s assets and therefore no deprivation?