Can a discretionary trust have a sole beneficiary?

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A client wants to setup a discretionary trust for their adult son. They want a discretionary trust to keep the capital protected in the event of the son having a divorce but ultimately want the assets to go to the son. There are no other potential beneficiaries. Can a discretionary trust exist with a sole beneficiary? I think 'yes' because the trustees have the discretion to pay out income or not and when to distribute capital. But because the son is the sole beneficiary at the end of the day I feel the trust would be taken into account in the divorce settlement (if a divorce ever happens - the parents are extremely cautious because the capital is seven figures and a relative lost a lot through divorce). If the discretionary trust can exist but won't protect the capital from divorce proceedings how about introducing another beneficiary such as a charity?

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By johngroganjga
23rd Mar 2017 10:01

Your client needs a family lawyer experienced in money cases to advise on how the courts will deal with the assets in the trust in the event of the beneficiary divorcing (or rather how they would deal with them today - I doubt that they will be prepared to predict the future). Ignore your own intuitions, and anything said to you by someone who is not a suitably senior and experienced family lawyer. If there is a seven figure sum at stake this needs to be dealt with properly.

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By gbuckell
23rd Mar 2017 14:27

As John says the divorce scenario is always thorny. But on your beneficiary point why not include the son's children and remoter issue even if none exist at present?

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Replying to gbuckell:
Morph
By kevinringer
24th Mar 2017 13:17

The son doesn't have any children at present. It would be possible to include future children in the class of beneficiaries but if there in practice there is a sole beneficiary would this achieve anything?

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By maxaca
24th Mar 2017 13:03

No a discretionary trust can not only have one beneficiary - there should at the very least be another long-stop beneficiary e.g. a charity - otherwise what happens if the sole beneficiary goes under a bus?
Also the rule about perpetuities does not allow non-distribution of income, except during an accumulation period. Accumulated income is capital/relevant property for IHT; undistributed income is not.
As already stated, proper legal advice is required - an accountancy forum can advise on the tax or accounting implications or consequences but should not provide legal advice.

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Morph
By kevinringer
24th Mar 2017 13:19

I agree that legal advice is needed and will be obtained by my client. I was trying to ascertain some key points at this early stage. Thank you all for your replies.

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