Chris Thorpe considers how trusts can be used to pass capital and income in a tax-efficient manner
Trustees of discretionary trusts have, as the name suggests, complete discretion as to the income and capital within their charge. The trustees are the legal owners of the assets and have all the freedom of ownership but hold them strictly as custodians; the beneficiaries are usually part of a distinctly identifiable group (e.g., the settlor’s children and ‘future issue’).
None of those beneficiaries has a right to any income or capital; they are only ‘potential’ beneficiaries; they may get nothing if the trustees see fit and only have the right to be considered and to have the trust administered properly.
Very often, the trustees will have in their possession a letter of wishes from the settlor outlining what the latter would like to happen to the income and capital within the
