benefit of a class of beneficiaries, where the trust assets are essentially ring-fenced and the trustees have discretion as to the timing and nature of distributions and to whom these are made. Bare trusts: where trustees hold the legal title to property on the beneficiary’s behalf, and the beneficiary holds the beneficial interest; and Fixed trusts: where the beneficiary has a fixed entitlement to the trust fund and the trustees have no discretion in this regard. Discretionary trusts are the most frequently utilised trust structure for estate planning purposes, particularly in the case of high-net worth families and those with young and / or vulnerable children. Due to the flexible nature of a discretionary trust, this can allow individuals and families to achieve specific estate planning goals, such as preservation of wealth and the controlled passing of assets to children / future generations. From a tax perspective, one of the primary benefits of a discretionary trust structure in Ireland is that it can defer capital acquisitions tax (CAT), until such time as assets are appointed to the discretionary beneficiaries. The flexibility provided here means the transfer of ones’ assets to a trust can allow individuals to manage their CAT liability and incidentally their own tax planning. Discretionary trusts may be subject to discretionary trust tax (DTT), by way of an initial charge of 6% of the trust value on either the death of the settlor or the date on which all principal objects of the trust have reached the age of 21, whichever is the later, although this can be reduced to 3% where the trust fund is transferred to the beneficiaries within five years of the initial charge arising. Thereafter an annual levy of 1% of the trust value arises as at 31 December each year. The DTT 56 LAWYER MONTHLY DECEMBER 2024
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