Hello all,
I have an estate to administer where the Will pertains to set up a discretionary trust with £10 being given to the Trustees to hold. It’s the usual 125 year discretionary trust where the Trust fund has been defined as £10, any other assets transferred to the Trustees to hold on the same terms, and any assets representing the above.
On reaching out to the firm who drafted the Will, they say, the trust is acting as a pilot trust and the client was advised to nominate their death in service to the Trustees of the trust with the view it will; not form part of the deceased’s estate, will not form part of any of the beneficiaries’ estates and control over the funds will be held by Trustees.
I’m much more familiar with pilot trusts being supplemental to Wills and not within them and with the trust being within the Will I’m looking for any second opinions as to the tax effect on the deceased’s estate of the the funds being paid to the Trustees of this trust. My initial research keeps confirming my thoughts which is that whether or not the death in service proceeds form part of the deceased’s estate is driven not by their destination, but rather the amount of discretion the death in service Trustees had over the destination. If the death in service Trustees have discretion then by all accounts it would seem the proceeds remain outside the taxable estate of the deceased. If they have no discretion then the proceeds form part of the deceased’s taxable estate.
Has anyone else had any experience of this or have any thoughts as to the tax effects of this structure?
Thank you.