The Benefits of Discretionary Trusts

From: The Will Company 

What are Bereaved Minor’s Trusts?

A Bereaved Minor’s Trust is one of the most common trusts that will arise from a will. It is a trust that will arise if a gift is made to the testator’s own children with an age condition of eighteen. It will ensure that the children can be provided for whilst they are minors but that they ultimately will inherit the trust assets when they turn eighteen.

Bereaved Minor’s Trust Conditions

There are a number of conditions that must be satisfied in order for the trust to be treated as a Bereaved Minor’s Trust.

  1. At least one of the minor’s parents must have died.
  2. The trust was created by the parent’s will, on intestacy, or under the Criminal Injuries Compensation Scheme.
  3. The trust must meet the conditions set out in section 71A Inheritance Tax Act 1984:
  • The minor becomes absolutely entitled to the trust property on or before he turns eighteen.
  • Whilst the minor is under eighteen, if any capital is applied to a beneficiary, it is applied to the benefit of the bereaved minor; and
  • While the minor is living and under eighteen, the minor is either entitled to all income generated by the trust or if income is applied, it is applied only for the benefit of the bereaved minor.

The term ‘parent’ includes a step-parent and a person who had parental responsibility for the child immediately before their death.

How does a Bereaved Minor’s Trust work?

On the parent’s death the trust is set up and the assets held by the trustees. While the minor is under 18 the trustees may accumulate any income produced, or apply income or capital for the minor’s education, maintenance or other benefit as they see fit. They can do this either by using it directly for the minor’s benefit themselves, or by paying it to the minor’s surviving parent or guardian. This means that the minor can still be benefited and provided for even whilst they are under eighteen.

When the minor turns 18, they will become absolutely entitled to the trust fund and will inherit it absolutely.

If the minor dies before turning eighteen, as they have no entitlement the trust fund will revert back to the testator’s estate and pass according to the terms of the testator’s will.

The trustees also have flexible powers to extend the trust period. If it is in the beneficiary’s best interests, they may make a ‘settled advance’ of the fund by advancing it to a different trust for the minor’s benefit and deferring the minor’s entitlement to a later date. This will however mean that the new trust is no longer taxed as a Bereaved Minor’s Trust and will instead be taxed under the relevant property regime unless any other tax regime applies.

Taxation of a Bereaved Minor’s Trust

Any trust assets will initially be taxed as part of the testator’s estate for inheritance tax. For Residence Nil Rate Band (RNRB) purposes, if a qualifying residential interest is left on a Bereaved Minor’s Trust, then the RNRB will be available.

Bereaved Minor’s Trusts have their own inheritance tax rules and are neither relevant property trusts nor interest in possession trusts.

There is no inheritance tax charge when the minor becomes absolutely entitled to capital or dies before becoming entitled to it.

There are no 10-year anniversary charges or charges when assets exit the trust, including if trust assets are advanced on new trusts for the benefit of the minor. However, the new trust may be relevant property and therefore there could be anniversary and exit charges on the new trust.

Bereaved Minor’s Trusts are also exempt from trust registration and do not need to be registered with the Trust Registration Service unless they become liable for any UK tax liability.

​Speak to Sussex Will Writers about organising your estate, Will and Lasting Power of Attorney.
Click to Call us on 01903 533681
or get in touch by emailing:

Sussex Will Writers 
T: 01903 533681
M: 07734 744886



Could you do with some FREE, sound advice on:

  • Writing a Will – What do I need and how much does it cost?
  • Creating Lasting Powers of Attorney – If I was incapacitated who can act on my behalf?
  • Property Protection Trusts – Can these really save Care Home Fees?
  • Pre-Paid Funeral Plans – With so many to choose from how do I decide which plan is best?

There is so much confusion on these vital areas of estate planning, that sometimes just a chat with an expert in the field can clear up misunderstanding and set out the way ahead, without all the legal jargon.

Or complete the form below

Steve Worsfold
Affiliate Member of the Society of Will Writers
Advising on Wills/Trusts/Probate/Powers of Attorney

Mobile: 07734 744886
Office: 01903 533681





Protecting What’s Precious to You,
Now and in the Future


Sussex Will Writers is proud to support Dementia Friends,
an initiative of The Alzheimers Society


Our business is certified ‘Safe to do business with’ and ‘Code compliant’
by the UK’s largest regulatory body for Will Writers, The Society of Will Writers.
Steve Worsfold has been an Affiliate Member of the Society for 15 years.