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UK Discretionary Trust Deed (Lifetime)

Settle property on a flexible UK lifetime Discretionary Trust under the Trustee Act 2000 + Perpetuities and Accumulations Act 2009 (125-year perpetuity period). Includes IHT relevant-property regime acknowledgement (10-year periodic charges up to 6%), CGT hold-over relief, McPhail v Doulton certainty of objects, STEP Standard Provisions incorporation, optional Protector role and the full British trust-administration framework.

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DISCRETIONARY TRUST DEED
Lifetime Settlement Under The Trustee Act 2000 + Perpetuities And Accumulations Act 2009  ·  2026-05-22
SETTLOR
Robert Edward Pemberton
34 Marsden Square, Kensington, London W8 6QR, Property investor
Settlor
ORIGINAL TRUSTEES
Margaret Anne Pemberton and Anthony James Hartwell
34 Marsden Square, Kensington, London W8 6QR; Hartwell Trust Services Ltd, 22 Bedford Square, London WC1B 3EG
Original Trustees
Trust Fund: £100,000.00 (initial settlement)
Trust period: 125 years
THIS DEED is made on 2026-05-22 by Robert Edward Pemberton (the "Settlor") in favour of Margaret Anne Pemberton and Anthony James Hartwell (the "Original Trustees", and together with any persons hereafter appointed, the "Trustees"). The Settlor wishes to settle the Trust Fund (defined below) on the Trustees on the discretionary trusts set out in this Deed, governed by the law of England and Wales.
1.
DEFINITIONS
1.1 In this Deed:
"Beneficiaries" means the class of persons defined in clause 3.
"Excluded Persons" means the persons identified in clause 3.3 (if any).
"Original Trust Fund" means the property identified in clause 4.
"Trust Fund" means the Original Trust Fund together with all property added to it from time to time and the income and accretions thereof.
"Trust Period" means the period of 125 years beginning with the date of this Deed (the maximum permitted by section 5 of the Perpetuities and Accumulations Act 2009).
"Vesting Date" means the date on which the Trust Period expires or such earlier date as the Trustees may appoint.
2.
DECLARATION OF TRUST
2.1 The Settlor hereby transfers and assigns the Original Trust Fund to the Trustees TO HOLD upon the trusts and with and subject to the powers and provisions set out in this Deed. 2.2 The Trustees acknowledge receipt of the Original Trust Fund and agree to hold the same and any additions thereto upon the trusts of this Deed.
3.
BENEFICIARIES
3.1 The Beneficiaries are the class consisting of:

(a) The Settlor's children: Charlotte Rose Pemberton, Edward James Pemberton, Beatrice Anne Pemberton.
(b) The Settlor's remoter issue (grandchildren and great-grandchildren), whether born before or after the date of this Deed.
(c) The spouses, civil partners, widows or widowers of the persons in (a) and (b).
(d) Any charity registered in the United Kingdom which the Trustees may select from time to time.

3.2 Primary beneficiary (for identification): Charlotte Rose Pemberton (though no Beneficiary has any vested or contingent interest in the Trust Fund unless and until the Trustees so appoint).

3.3 Excluded Persons — for the avoidance of any anti-avoidance issue under section 624 of the Income Tax (Trading and Other Income) Act 2005 and sections 102-102B Finance Act 1986 (gift with reservation), the Settlor and the Settlor's spouse / civil partner are excluded from benefit. Additionally:
The Settlor (Robert Edward Pemberton) and the Settlor's spouse Margaret Anne Pemberton are absolutely excluded from any benefit under this Trust.

3.4 The class of Beneficiaries is administratively workable and meets the certainty-of-objects test in McPhail v Doulton [1971] AC 424 (the trust is valid if the Trustees can identify, of any given individual, whether they fall within the class).
4.
TRUST PROPERTY
4.1 The Original Trust Fund consists of:

£100,000.00 (one hundred thousand pounds sterling) being a chargeable lifetime transfer for IHT purposes (the Settlor's annual exemption and any prior chargeable transfers having been taken into account); together with such further property as may be added by the Settlor or any other person from time to time.

4.2 Initial value: £100,000.00.

4.3 Additional property may be added to the Trust Fund by the Settlor or any other person at any time; such additions shall form part of the Trust Fund and be subject to all the trusts of this Deed.
5.
DISCRETIONARY TRUSTS — POWER OF APPOINTMENT
5.1 During the Trust Period the Trustees shall hold the Trust Fund upon such trusts in favour of all or any one or more of the Beneficiaries, exclusive of the others, in such shares, on such terms, and in such manner as the Trustees in their absolute discretion shall by deed or deeds revocable or irrevocable appoint. 5.2 The Trustees may make appointments at any time and from time to time. The Trustees' discretion is unfettered subject to the duties owed to the Beneficiaries collectively, including the duty to consider the exercise of their power from time to time (Re Hay's Settlement Trusts [1982] 1 WLR 202). 5.3 Subject to any such appointment, the Trustees shall hold the Trust Fund and the income thereof in trust to apply or accumulate the income for or among such of the Beneficiaries as the Trustees in their absolute discretion think fit.
6.
DEFAULT TRUSTS
6.1 Subject to any appointment under clause 5 and to the Trust Period, on the Vesting Date the Trustees shall hold the Trust Fund and the accumulated income upon trust in equal shares for those of the Beneficiaries then living, and if more than one, in such proportions as the Trustees may by deed or memorandum determine. 6.2 If at the Vesting Date there are no Beneficiaries living, the Trust Fund shall be held on charitable trusts for such charitable purposes as the Trustees in their absolute discretion select.
7.
INVESTMENT POWERS
7.1 The Trustees shall apply the standard investment criteria in sections 3-5 of the Trustee Act 2000 — suitability to the trust and diversification — and shall obtain and consider proper advice in accordance with s.5.
7.2 The duty of care under section 1 Trustee Act 2000 applies to all investment decisions. Investments must be reviewed from time to time. The Trustees shall not be liable for any investment loss provided they have acted with the statutory care.
7.3 The Trustees may pool the Trust Fund with other trust funds for investment purposes, with proper accounting between the trusts.
8.
POWER TO ACQUIRE LAND
The Trustees may acquire freehold or leasehold land in the United Kingdom or elsewhere as an investment, for occupation by a Beneficiary, or for any other reason in furtherance of the trusts under section 8 of the Trustee Act 2000. The Trustees have all the powers of an absolute owner in relation to land so acquired, including the power to sell, lease, charge or improve.
9.
DELEGATION OF FUNCTIONS
The Trustees may delegate any of their functions to an agent in accordance with Part IV of the Trustee Act 2000 (sections 11-23). Delegated functions may include asset management, custody and administration. The Trustees must keep the arrangements under review and may not delegate decisions about benefits to or appointments in favour of the Beneficiaries.
10.
TRUSTEE REMUNERATION
Any Trustee who acts in a professional capacity is entitled to receive reasonable remuneration for services provided to the trust in accordance with sections 28-30 of the Trustee Act 2000. Agreed charging basis: Hartwell Trust Services Ltd's standard hourly rates current from time to time, plus reasonable disbursements. Annual administration cap of £6,000 (subject to RPI uplift) for routine work; exceptional matters quoted separately.. The remuneration is payable even for services that could have been provided by a lay trustee. A trustee may not act in two capacities (e.g. as a trustee and as their own legal adviser) for the same matter without disclosing the conflict.
11.
STEP STANDARD PROVISIONS
The STEP Standard Provisions (3rd edition) are hereby incorporated into this Deed by reference and shall apply to the Trustees' administration of the Trust Fund, save where expressly inconsistent with the provisions of this Deed (in which case this Deed prevails). A copy is available on request from the STEP UK and Ireland Practice Council.
12.
PROTECTOR
8.1 A Protector is appointed under this Deed: Sir James Edwin Cartwright KC of Lincoln's Inn, London WC2A 3TL. The Protector's powers are limited to those specifically conferred below.
8.2 The Protector has the power to remove and appoint Trustees by deed. Such removal does not require any reason and takes effect on delivery of the deed to the Trustees. The newly-appointed Trustee must be willing to act and not within any class of Excluded Persons.
8.3 The Protector is a fiduciary in relation to these powers and must exercise them honestly and in good faith but is not required to consider any particular factor before exercising them.
13.
LETTER OF WISHES
9.1 The Settlor may from time to time prepare a Letter of Wishes setting out the Settlor's non-binding views on the exercise of the Trustees' powers. The Letter of Wishes is intended as informal guidance only and creates no obligation on the Trustees. 9.2 The Trustees shall give such weight to the Letter of Wishes as they consider appropriate. The Letter of Wishes is not part of this Deed and may be amended or replaced by the Settlor at any time during the Settlor's lifetime.
14.
INHERITANCE TAX — ACKNOWLEDGMENT OF RELEVANT-PROPERTY REGIME
10.1 The parties acknowledge that this Trust is a relevant property trust within the meaning of section 58 of the Inheritance Tax Act 1984. 10.2 The Trust is subject to the following IHT charges: (a) the Settlor's transfer to the Trust is a chargeable lifetime transfer (IHTA 1984 s.7) — taxed at 20% on the excess over the Settlor's Nil Rate Band (£325,000, frozen to 5 April 2031), with 40% tax on death within 7 years subject to taper relief; (b) a 10-year periodic charge arises on every tenth anniversary of the Trust under IHTA 1984 s.66 (maximum effective rate 6% of the Trust Fund); (c) exit charges apply on capital distributions out of the Trust (IHTA 1984 s.65). 10.3 The Trustees shall maintain proper accounts to track the IHT position. The Settlor confirms the Trust is not a gift with reservation of benefit (FA 1986 s.102; Settlor and spouse excluded by clause 3.3).
15.
CAPITAL GAINS TAX — ACKNOWLEDGMENT
11.1 The transfer of property to the Trust is a disposal for CGT purposes (TCGA 1992 s.70). The Settlor may be able to claim hold-over relief under TCGA 1992 s.260 because the transfer is a chargeable lifetime transfer for IHT. 11.2 Within the Trust, the trustees' CGT rate is 20% (28% for residential property post-April 2020) above the annual allowance (currently £1,500 — half of the individual allowance). Distributions of capital are deemed disposals at market value with possible hold-over election under TCGA 1992 s.260 / 165.
16.
APPOINTMENT, RETIREMENT AND REMOVAL OF TRUSTEES
12.1 The statutory power to appoint new and additional Trustees in sections 36-37 of the Trustee Act 1925 applies, subject to: (a) the Protector's consent where required by clause 8 above; (b) the new Trustee not being an Excluded Person. 12.2 A Trustee may retire by deed under section 39 of the Trustee Act 1925 provided that after the retirement at least two Trustees (or a trust corporation) remain. 12.3 The Beneficiaries may exercise their statutory right to direct the appointment and retirement of Trustees under section 19 of the Trusts of Land and Appointment of Trustees Act 1996 only where the trust property does not include land settled prior to commencement of TLATA.
17.
TRUSTEE INDEMNITY AND LIABILITY
13.1 The Trustees are entitled to be indemnified out of the Trust Fund against all costs, expenses and liabilities properly incurred in the execution of the trusts. 13.2 No Trustee shall be personally liable for any loss arising from the exercise or non-exercise of any power conferred by this Deed, provided that they have acted in good faith and with the statutory duty of care under section 1 of the Trustee Act 2000 (or are protected by section 61 of the Trustee Act 1925 — court relief from honest and reasonable mistakes). 13.3 This indemnity does not extend to any liability arising from the Trustee's own actual fraud, wilful misconduct, or gross negligence.
18.
EXCLUSION OF THE SETTLOR (GIFT WITH RESERVATION SAFEGUARD)
14.1 The Settlor and the Settlor's spouse / civil partner are absolutely excluded from any benefit under this Trust. No Trustee may exercise any power so as to benefit either of them. 14.2 This exclusion is intended to ensure that the transfer is not a "gift with reservation of benefit" within sections 102-102B of the Finance Act 1986, so that the Trust Fund falls outside the Settlor's estate for IHT purposes on the Settlor's death.
19.
VARIATION OF THE TRUST
15.1 The Trustees may by deed vary administrative provisions of this Deed (powers, machinery, charging) provided that no such variation alters the dispositive trusts (clauses 5-6) or excludes any Beneficiary.
20.
GOVERNING LAW AND JURISDICTION
This Deed and the Trust hereby established shall be governed by and construed in accordance with the law of England and Wales. The courts of England and Wales shall have exclusive jurisdiction. The Trust is established in compliance with the Recognition of Trusts Act 1987 and is intended to be recognised under that Act in any other jurisdiction.
21.
EXECUTION AS A DEED
This Deed has been executed and delivered as a deed on the date first written above. The Settlor signs as an individual in accordance with section 1 of the Law of Property (Miscellaneous Provisions) Act 1989: signed by the Settlor in the presence of an attesting witness. Each Trustee signs to accept office and to confirm receipt of the Original Trust Fund. The 12-year limitation period under section 8 of the Limitation Act 1980 applies to actions on this Deed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.
SETTLOR
2026-05-22
Date of execution
Robert Edward Pemberton
Date: ____________________
FIRST TRUSTEE
2026-05-22
Original Trustee
Margaret Anne Pemberton
Date: ____________________
SECOND TRUSTEE
2026-05-22
Original Trustee
Anthony James Hartwell
Date: ____________________
WITNESS (SETTLOR SIGNATURE)
[Witness Name]
Witness: sign, full name, address, occupation
Date: ____________________

What Is a Discretionary Trust?

A discretionary trust is the most flexible UK trust structure. The Settlor transfers property to the Trustees, who hold it for a class of "Beneficiaries" (often the Settlor's children, grandchildren, spouses and selected charities) without any individual beneficiary having a vested or contingent right. The Trustees have absolute discretion as to which beneficiaries receive what, when, and on what terms. This flexibility is the trust's greatest asset — it can adapt to changes in family circumstances, tax law, and beneficiary needs over up to 125 years.

In the United Kingdom, discretionary trusts are central to family estate planning, IHT mitigation, business-asset protection, and provision for vulnerable or improvident beneficiaries. They are taxed under the "relevant property regime" of the Inheritance Tax Act 1984 — the Settlor's transfer in is a Chargeable Lifetime Transfer (20% lifetime IHT on the excess over the nil-rate band), the trust faces a 10-year periodic charge of up to 6%, and capital distributions trigger exit charges. The CGT treatment includes hold-over relief under TCGA 1992 s.260 because of the CLT entry.

Many British providers decline to template discretionary trusts because of their inherent legal and tax complexity — multiple statutes (Trustee Act 2000, Trustee Act 1925, TLATA 1996, Perpetuities and Accumulations Act 2009, IHTA 1984, TCGA 1992), the McPhail v Doulton certainty-of-objects test, the Hastings-Bass principles in Pitt v Holt, and the STEP Standard Provisions framework. Our UK template covers all of this, generating a deed that is fit to be reviewed by a STEP-qualified solicitor with minimum amendment.

What's Covered in This Template

Our UK Discretionary Trust Deed template generates a comprehensive deed with the Trustee Act 2000 powers, STEP overlay, IHT and CGT framework, and optional Protector role.

Settlor + 2-3 Original Trustees

Settlor (the person transferring property), with 2 or 3 original Trustees (lay and/or professional). Trustee succession framework included.

Beneficiaries Class

Defined class of discretionary objects — typically Settlor's issue, spouses / civil partners, and selected charities. McPhail v Doulton certainty test applied.

Settlor Exclusion (Critical)

Explicit exclusion of the Settlor and Settlor's spouse from any benefit — essential to avoid the gift-with-reservation IHT trap under FA 1986 ss.102-102B.

Trust Property + Period

Initial settlement (e.g. £10 cash, or substantial property), valuation, and 125-year trust period (the post-PA Act 2009 maximum).

Discretionary Trusts — Power of Appointment

Trustees' absolute discretionary power to appoint and distribute among the Beneficiaries; default trusts on failure of all appointments.

Investment Powers — 3 Modes (Expert)

Standard Trustee Act 2000 ss.3-5 investment criteria; unrestricted (broader than statutory); or ESG / ethical overlay. Duty of care under s.1 applies.

Power to Acquire Land (Expert)

Trustee Act 2000 s.8 power to acquire freehold or leasehold land in the UK or overseas, with the powers of an absolute owner.

Delegation + Charging (Expert)

Part IV ss.11-23 delegation framework; professional trustee charging under ss.28-30 with agreed charging basis.

STEP Standard Provisions (Expert)

Incorporation of the STEP Standard Provisions (3rd edition) by reference — the well-tested British trust-administration framework.

Optional Protector (Expert)

Optional Protector role with limited powers (consent / removal / both). Fiduciary in exercising the role; preserves family control.

IHT Relevant-Property Regime (Expert)

Acknowledgement clause for the 10-year periodic charge (up to 6%), exit charges, CLT entry (20%), and the £325k frozen NRB.

Letter of Wishes Reference (Expert)

Non-binding guidance from the Settlor to the Trustees on the exercise of their discretionary powers.

How to Create a Discretionary Trust Deed

Follow these steps to settle a UK lifetime Discretionary Trust.

  1. 1

    Identify the Settlor and Trustees

    The Settlor is the person transferring property. The Original Trustees (minimum 2, ideally 3) hold and manage the trust property. A common British structure is one or two family Trustees (e.g. spouse, adult child) plus one professional Trustee (solicitor, accountant, or trust corporation). Enter the Settlor's occupation for the deed recitals.

  2. 2

    Define the Beneficiaries Class

    Identify the class of discretionary objects. Typical UK families include: Settlor's children; remoter issue (grandchildren and great-grandchildren); spouses / civil partners of the foregoing; UK-registered charities selected by the Trustees. The class must be administratively workable and meet the McPhail v Doulton [1971] AC 424 certainty test. Name a primary beneficiary for identification only (no vested interest).

  3. 3

    Specify the Initial Property and Period

    Enter the initial trust property — often £10 cash to constitute the trust, with substantial property added later, or a meaningful initial settlement (e.g. £100,000 cash or specific assets). For IHT, the transfer is a Chargeable Lifetime Transfer. Enter the trust period (default 125 years — the post-PA Act 2009 maximum). Select the governing law (England & Wales, Scotland, or NI).

  4. 4

    Add Investment + Administrative Powers (Expert)

    In Expert mode, select the investment standard (Trustee Act 2000 ss.3-5 standard / unrestricted / ESG), include the s.8 power to acquire land, enable Part IV delegation, and (where a professional Trustee is acting) include a charging clause with the agreed basis. Optionally incorporate the STEP Standard Provisions for a well-tested administrative framework.

  5. 5

    Add Protector + IHT + Boilerplate (Expert)

    In Expert mode, optionally appoint a Protector with limited consent / removal powers. Include the Letter of Wishes reference (non-binding guidance), the IHT relevant-property regime acknowledgement (10-year charges up to 6%, exit charges, CLT entry under IHTA 1984 s.7), the CGT hold-over reference, the explicit Settlor exclusion clause (FA 1986 s.102 safeguard), the trustee appointment / retirement / removal framework (Trustee Act 1925 ss.36-37, 39), and the trustee indemnity. Execute as a deed in the presence of a witness and have all Trustees sign to accept office.

Legal Considerations

UK discretionary trusts are governed by multiple statutes, common-law principles and a specific tax regime. Specialist advice is strongly recommended for any substantial settlement.

This template is for informational purposes only and does not constitute legal or tax advice. UK trust law and IHT planning are specialist areas — consult a STEP-qualified solicitor or chartered tax adviser for advice specific to your circumstances.

Reviewed for England & Wales trust law

Statutory Framework

British discretionary trusts are governed by the Trustee Act 2000 (powers of trustees — investment, land, delegation, remuneration, insurance), the Trustee Act 1925 (appointment, retirement, court protection), the Trusts of Land and Appointment of Trustees Act 1996 (TLATA — trusts of land + beneficiary direction), and the Perpetuities and Accumulations Act 2009 (125-year perpetuity period for UK trusts created on or after 6 April 2010, replacing the old "royal lives" clause and abolishing the restriction on accumulation periods). The Recognition of Trusts Act 1987 secures recognition of the trust in other jurisdictions.

Certainty of Objects — McPhail v Doulton

A British discretionary trust is valid if the Trustees can determine, of any given individual, whether they fall within the class of beneficiaries — the test in McPhail v Doulton [1971] AC 424. The class must also be administratively workable (Re Manisty's Settlement [1974] Ch 17 — not capricious or arbitrary). Standard UK formulations (Settlor's issue + spouses + charities) are well-tested. The Trustees have a duty under Re Hay's Settlement Trusts [1982] 1 WLR 202 to consider from time to time whether and how to exercise their discretion.

IHT Relevant-Property Regime

Under sections 58 and 64-66 of the Inheritance Tax Act 1984, a UK discretionary trust is a "relevant property" trust. The Settlor's transfer to the trust is a Chargeable Lifetime Transfer taxed at 20% on the excess over the Settlor's £325,000 Nil Rate Band (frozen to 5 April 2031), with a 40% rate on death within 7 years subject to taper relief. Every tenth anniversary of the trust attracts a periodic charge of up to 6% of the trust value (the "mainstream" charge in IHTA 1984 s.66). Exit charges arise on capital distributions out of the trust (s.65). Our British template includes a dedicated IHT acknowledgement clause.

CGT + Settlor Exclusion (Critical)

The transfer of property to the trust is a chargeable disposal for CGT (TCGA 1992 s.70), but the Settlor may claim hold-over relief under TCGA 1992 s.260 because the entry is a Chargeable Lifetime Transfer for IHT. Within the British trust, the Trustees pay CGT at 20% (28% for residential property post-April 2020). The Settlor and the Settlor's spouse must be absolutely excluded from benefit to prevent the entire trust being treated as a "gift with reservation of benefit" under FA 1986 ss.102-102B — which would bring the trust property back into the Settlor's estate for IHT on death. The Settlor-exclusion clause is therefore one of the most important provisions in any UK lifetime discretionary trust.

Frequently Asked Questions

Settle Your UK Discretionary Trust Now

Use our free template to draft a comprehensive UK lifetime Discretionary Trust Deed under the Trustee Act 2000 + Perpetuities and Accumulations Act 2009. Includes IHT relevant-property acknowledgement, STEP Standard Provisions, optional Protector, full investment powers and Settlor-exclusion safeguard.

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