What a discretionary trust deed actually is
A discretionary trust deed is the legal document that creates a trust in which no beneficiary has a fixed, guaranteed share. The trustees hold the assets and decide who, among a named class of people, receives income or capital, how much, and when — or whether anyone receives anything for now. Nothing in a discretionary trust belongs to any beneficiary until the trustees decide it does. That is the whole point of it, and the whole reason it is drafted rather than filled in.
It is not the same instrument as a declaration of trust between co-owners of a property — the document that records who owns what share of a jointly held home. That is a different document with a different job, priced on its own page. Nor is it a will: a discretionary trust can be created in your lifetime by a deed, or on death by your will, and the choice between the two changes the tax more than it changes the drafting fee (§IV).
HMRC's own description is the plainest one: “These are where the trustees can make certain decisions about how to use the trust income, and sometimes the capital” — deciding, depending on the deed, what gets paid out, which beneficiary to pay, how often, and on what conditions.
It names the two situations discretionary trusts are usually set up for: “a future need, like a grandchild who may need more financial help than other beneficiaries at some point in their life”, and “beneficiaries who are not capable or responsible enough to deal with money themselves”.
The parts every discretionary trust deed has to settle:
- The settlor — whoever puts assets in. In a lifetime trust that transfer is what triggers the Inheritance Tax questions in §IV, and whether the settlor can ever benefit again is one of the deed's most consequential lines (§II).
- The trustees — who hold the legal title and exercise the discretion. They owe the statutory duty of care: s.1 Trustee Act 2000's “such care and skill as is reasonable in the circumstances”, and the deed says how they are replaced when one dies or retires — the person the deed nominates has the first right to appoint under s.36(1)(a) Trustee Act 1925; only if it names no one does that right pass to the continuing trustees.
- The beneficiary class — named individuals or a defined group: “my children and their issue”, “my grandchildren, whenever born.” The class must be certain enough to work: the courts' test is whether it “can be said with certainty that any given individual is or is not a member of the class” (McPhail v Doulton [1971] AC 424). A class that fails that test fails the trust.
- The trust fund — what goes in. A deed on its own is an empty container: the trust only takes effect over an asset once that asset is actually transferred to the trustees, which for a property means a Land Registry transfer, and for an investment account means re-registration.
- The trust period — how long it can last. For a trust created today the statutory maximum is 125 years (s.5 Perpetuities and Accumulations Act 2009), and the deed says what happens to anything still in the fund at the end.
- The trustees' powers — over investment, over paying out capital, over lending to or housing a beneficiary, over adding or excluding people from the class. Statute supplies defaults (a general power of investment under s.3 Trustee Act 2000, power to buy land under s.8 Trustee Act 2000, powers of maintenance and advancement under ss.31–32 Trustee Act 1925); a working deed sets them out expressly rather than leaving the trustees to work out which version of the default applies to them.
- The letter of wishes — the settlor's private, non-binding guidance to the trustees on how to use their discretion. It sits alongside the deed, not inside it, and it is the document families most often forget to write.
Why the free templates that rank for this search can't finish the job
A template can hold the shape of a discretionary trust. It cannot make the decisions a working one depends on. Nothing in the law of England and Wales requires a solicitor to draft a trust deed, and a discretionary trust of cash or investments can be created without any special form of words at all — so the honest answer to “can I just download one?” is that you can, and the question is what you will have downloaded.
What follows is the list of things a template leaves blank, or fills in wrongly, that actually determine whether the trust does what you set it up to do. They are judgement calls, not boilerplate, and they tend to surface only when a bank, HMRC or a beneficiary relies on the deed and reads it literally.
Who exactly is in the class — and who can change it
Whether the settlor can ever benefit
What the trustees can actually do
Who appoints the next trustee — and who can remove one
What happens at the end — and to anything unallocated
The paperwork the deed triggers, which the deed itself never mentions
None of this makes a template illegal. It makes it incomplete in exactly the places where completeness is what you are paying for.
What it costs to have one drawn up
For a straightforward lifetime discretionary trust deed, the figures UK firms and cost guides publish converge on roughly £500 to £3,000 plus VAT. That is a synthesis, as at 3 September 2026, of several firms' own published pricing and the cost guides written for this search — not a single sourced statistic, not an average, and not a quote. Read it as “commonly quoted between.”
Two things sharpen it. The fixed fees SRA-regulated firms actually list for a lifetime discretionary trust — with tax advice and Trust Registration Service registration included — tend to start at around £1,500 plus VAT, or £1,800 with VAT added. And the figures below about £1,000 are usually something else: a discretionary trust written into a will rather than a lifetime deed, or a deed drafted without advice or registration. At the top, fully advised packages — deed, letter of wishes, Inheritance Tax reporting and registration together — are quoted by some providers at over £4,000 plus VAT.
Every figure on this page is stated before VAT
What moves a quote within the range:
- How many beneficiaries and classes it names, and how much discretion is layered on — default beneficiaries, powers to add and exclude, separate funds for different branches of a family.
- What the trust will hold. Cash and investments are the cheap end. A property means a Land Registry transfer and its own fee; business interests, a family company or a share of a farm mean valuation questions and relief questions a deed cannot answer on its own.
- Whether the transfer in is chargeable — and therefore whether the fee includes the IHT100 report and the calculation behind it (§IV), or leaves it to you.
- Whether Trust Registration Service registration is included — some fees bundle it, some bill it separately at £295 upward (§V).
- Whether a letter of wishes is drafted with it. Cheaper quotes often omit it; it is the document the trustees will actually reach for.
- Lifetime deed or will trust. A discretionary trust written into a will is priced as part of the will and carries no lifetime entry charge — but it does nothing until death, and a home left into one costs the estate the residence nil-rate band (§IV). Our wills page covers that route.
A lifetime discretionary, life-interest or disabled person's trust deed, with the Trust Registration Service entry filed as part of the same instruction, is one of the things our own specialist desk prepares — see the service. It is priced on that page, not this one.
The tax cost that sits alongside the drafting fee
Most people who search for a trust deed template have no idea that the trust itself becomes a taxpayer. This is the part of the bill a drafting fee is really buying — the transfer in, the trust's own returns, and the charges HMRC levies on the fund on a repeating cycle — and it is why the “cost” of a discretionary trust is never the deed alone.
Every figure here describes the general rule; what any particular trust owes depends on the settlor's other gifts, on related settlements and on reliefs, none of which a page can compute for you.
| When | What is charged | Rate / figure | Why professional drafting matters here |
|---|---|---|---|
| On the transfer in — immediately | A chargeable lifetime transfer to Inheritance Tax — not a potentially exempt transfer. s.3A(1A) IHTA 1984 reserves PET status for gifts to individuals, a disabled person's trust, or a bereaved minor's trust on the ending of an IPDI. | 20% above your available nil-rate band — £325,000 less any chargeable gifts in the previous 7 years — where the trustees pay (s.7(2) IHTA 1984: half the death rate); more if the settlor pays, since “the amount of tax due will therefore increase”. Reported on IHT100 with event form IHT100a, by the end of the sixth month after the event; low-value excepted settlements may not need to report at all. | Whether the transfer is chargeable — and whether the drafting fee includes calculating and filing the IHT100 — is the single biggest swing in what a lifetime deed actually costs (§III). |
| If the settlor dies within 7 years of the transfer | The lifetime charge is recalculated at the death rate, with credit for tax already paid. | “the tax will be recalculated at 40% and a credit allowed for the tax paid when the trust was set up. The trustees will be liable to pay the extra tax.” Where the gift was made more than 3 years before death, s.7(4) IHTA 1984 tapers the recalculated charge to 80%, 60%, 40% or 20% of the full rate — but s.7(5) IHTA 1984 stops taper ever reducing the bill below the lifetime tax already paid. | Even where no lifetime tax was due, the transfer's value is still added back into the death estate — a drafted deed records the transfer date precisely, which is exactly what the taper calculation turns on. |
| Never in the settlor's lifetime — only at death | No lifetime charge; the assets are simply part of the estate, assessed at death in the ordinary way. | No entry rate — but two costs a will-trust template won't flag: a home left into a discretionary trust “will not qualify for the additional threshold even if the beneficiaries are direct descendants” — the residence nil-rate band is lost — and a discretionary will trust running past two years from death loses its Trust Registration Service exclusion (§V). | The drafting fee is broadly similar to a lifetime deed, often lower — but the lost RNRB and the two-year TRS clock are exactly the kind of consequence a free template never surfaces. |
| Every 10 years, from the date the trust was set up | The principal (ten-year) charge on relevant property. | Up to 6% — HMRC's manual sets the ceiling: the rate “cannot exceed 6%” (IHTM42087), charged where the trust “contains relevant property with a value above the Inheritance Tax threshold”. Full calculation on its own page. | The deed you sign today fixes the date this charge falls on for the life of the trust — this page's job is only to tell you the charge exists. |
| Whenever assets leave the trust | An exit charge on relevant property distributed to a beneficiary, or on the trust ending. | Up to 6% — not charged on transfers out within 3 months of set-up or within 3 months after a ten-year anniversary, nor on the trustees' own costs. Reported on IHT100 by the end of the sixth month after the event, with the tax paid on the same deadline. | Distributing capital without checking these timing windows first is one of the more common, and more costly, mistakes trustees make without drafted guidance behind them. |
| Every year, on income the trust receives | Income Tax at the trust rates. | 45% on non-dividend income, 39.35% on dividends — no dividend allowance — above a tax-free amount of normally £500 that is divided between every accumulation or discretionary trust the same settlor has set up. Above it, “tax is due on the full amount.” Where the settlor can benefit, the income is taxed as the settlor's instead (§II). | That £500 tax-free amount is shared across every trust one settlor has created — a drafted deed and a properly kept letter of wishes are what let trustees track this correctly across more than one. |
| On the way in, and on any gain while the trust holds the asset | Capital Gains Tax — the settlor's, on the transfer in; the trustees', on gains inside the trust. | Trustees pay at 24%, with an annual exempt amount of £1,500 for 2026–27 — half the individual's £3,000, and the figure most often mis-stated — rising to £3,000 only where a beneficiary is vulnerable, and reduced where the settlor has created more than one settlement since 6 June 1978. Any UK residential property sold must be reported and the tax paid within 60 days of completion. | Hold-over relief can sometimes defer the settlor's own gain on the way in — whether it applies is a drafting-stage question, not something to work out afterwards. |
| Never — for as long as the trust qualifies | None of the ten-yearly or exit charges, and no immediate chargeable transfer on the way in. | The relevant-property regime simply doesn't apply while the assets remain the disabled beneficiary's own interest. | That's not a reason to prefer this structure on its own — it's a reason the structure decision (§VI) has to come before the drafting, which is the one thing a template can't do for you. |
Every rate above is HMRC's published general rule as at 3 September 2026. This page will never produce a “your tax will be £X” figure: the actual liability of any trust depends on the settlor's other transfers in the same seven years, on related settlements, and on the settlor's own nil-rate band position.
Registering it — and keeping it registered
Almost every lifetime discretionary trust has to be registered with HMRC's Trust Registration Service, whether or not it owes any tax. HMRC's rule is that “all UK resident express trusts” must register “unless they are excluded from registration as a Schedule 3A trust” — and a lifetime discretionary trust is the paradigm express trust.
Look down the exclusion list and nothing on it fits: the co-ownership exclusion (which the declaration of trust page covers) only applies where “the trustees and beneficiaries are the same persons”, and a discretionary class is almost always wider than its trustees; the will-trust exclusion only covers a trust “set up on death … and … closed within 2 years of death”; and the general low-value exclusion added in 2026 needs the trust to hold no UK land, no asset of appreciable worth over £2,000, never more than £10,000 in total, no income over £5,000 a year and no UK tax liability — and even then only one such trust per settlor.
A separate rule catches the rest: any trust with a UK tax liability must register regardless of exclusion.
The clock is 90 days. For a trust created after 6 October 2020 the deadline is “within 90 days of it being created or of it becoming liable for tax,” and once registered, “all changes must be reported to HMRC within 90 days of them occurring” — a new trustee, a beneficiary reaching 18, an address.
HMRC's headline warning is that “if you fail to register a trust, you may need to pay a £5,000 penalty” — a fixed £5,000, not a sliding maximum; its manual adds that a warning letter with a time limit normally comes first and that penalties are applied “on a case-by-case basis.” The full deadline mechanics, the correction-window policy and the will-trust exclusion are on our Trust Registration Service page — this page does not restate them.
Whether registration is inside the drafting fee is the single most common thing two quotes differ on. Ask. If you already hold a signed deed and only need the entry filed, our specialist desk handles the registration on its own.
Discretionary, life-interest or bare — which structure actually fits
Three trusts answer three different questions, and the drafting fee is roughly the same for each — so the judgement is which one to draft, not which one is cheapest.
Discretionary
No beneficiary has a fixed entitlement. The trustees decide who receives what and when.
It is the structure for a beneficiary whose needs are unknown, a beneficiary who should not hold capital outright, or a family whose shape may change. Its price is the relevant-property regime in §IV: a chargeable entry, ten-yearly and exit charges, and the top rates of Income Tax on what it earns. This page is about this one.
Life-interest
One beneficiary has a fixed right to the income, or to live in a property, for life — typically a surviving spouse — and the capital passes to others afterwards.
How it is taxed depends on how it was created. Created by will or on intestacy, the life tenant's interest is an immediate post-death interest (s.49A IHTA 1984), and s.49 IHTA 1984 treats the life tenant as owning the underlying property — so it sits in their estate at death and outside the ten-yearly regime. Created by a lifetime deed on or after 22 March 2006, it is relevant property like a discretionary trust; income is taxed at 20% and 10.75% rather than the discretionary rates. Full treatment on our life interest trust and IPDI page.
Bare
The beneficiary is entitled to everything, now. The trustees hold the assets in name only.
In England and Wales the beneficiary can call for capital and income at 18. A gift into one is a gift to that individual — a potentially exempt transfer under s.3A IHTA 1984, exempt if the settlor survives 7 years — and there is no ten-yearly or exit charge. The beneficiary, not the trust, is taxed on the income. It buys simplicity and no flexibility at all: nothing can be redirected later, and the beneficiary takes at 18 whatever has become of them.
A fourth, the disabled person's trust, is covered in §IV row 8 and on the IPDI page; it is often the right answer where a discretionary trust was the first instinct.
Who actually needs one — and who doesn't
A discretionary trust earns its cost in a narrow set of situations, and outside them the ongoing tax and administration in §IV can outweigh the flexibility it buys. This section describes the shapes of estate that usually benefit and usually don't. It cannot tell you which one is yours.
Usually worth it
A beneficiary who is a minor, financially vulnerable, or whose future is genuinely unknown: a young grandchild, a child whose marriage or finances you would not want to bet the fund on, a blended family where the settlor wants to provide for a second spouse without disinheriting first-family children, a family business or farm whose ownership should not be split among people who will never run it. Where the beneficiary is disabled, a disabled person's trust — outside the ten-yearly regime — is usually the first structure to test, not the second.
Often not needed
An estate comfortably inside the nil-rate band, with adult, financially independent beneficiaries who can simply be given the money — outright, or by will. Here the trust adds a 90-day registration, a 45% Income Tax rate on what the fund earns, a trust tax return, and a ten-year cycle of calculations, in exchange for a discretion nobody needed to exercise. A home moved into a lifetime discretionary trust also forfeits the residence nil-rate band it would have carried on death.
Worth a specialist's hour first
Anything involving a property the settlor still lives in (the reservation-of-benefit rule in §II applies in full); an estate near or above the nil-rate band where the entry charge in §IV row 1 is live; a settlor who has made other chargeable gifts in the last 7 years; business or agricultural assets where reliefs turn on how they are held; or a beneficiary receiving means-tested benefits, where a trust's terms can change their entitlement. These are the cases where being subtly wrong costs more than the deed.
Where the boundary is reached, Valoren refers.
Whether a discretionary trust is the right structure for what you are trying to protect is a judgement this page can inform but not make for you — and once it is the right call, the deed itself has to survive scrutiny from HMRC, from whichever bank or registry is asked to act on it, and from a future trustee or court reading it literally. A template can hold the shape of a discretionary trust; it cannot make the decisions a working one depends on, and a deed that leaves the settlor in the class, the class uncertain, or the registration undone can leave you worse off than having settled nothing. There are two routes to someone who drafts one properly, and we are straightforward about which one is ours.
Common questions
Checked directly against GOV.UK, HMRC's internal manuals, and legislation.gov.uk on 3 September 2026. This page is information about how the rules work, not advice on your situation — for a discretionary trust that needs to hold up if it's ever challenged, take advice from a solicitor or STEP-qualified practitioner before relying on anything stated here.
Three ways to act on this, depending on where you are.
One reader is ready to set up a discretionary trust and wants the deed, the powers and the registration handled together. Another already has a signed deed and just needs the Trust Registration Service entry filed. A third isn't sure a discretionary trust is even the right structure yet.
Have the deed drafted properly
A lifetime discretionary trust deed, letter of wishes and TRS registration prepared in one instruction.
Start a free intakeAlready have a signed deed?Just need it registered
If the deed is done and you only need the Trust Registration Service entry filed, our specialist desk handles that on its own.
See the registration serviceNot sure which structure fits?Discretionary vs life-interest trust
Compare a discretionary trust against a life-interest trust and an IPDI before you commit to drafting either.
Read the life interest & IPDI page