Assessable Assets from Discretionary Trusts pre 01/01/2002

External

Policy

Assessment of assets

If a person and/or their partner are beneficiaries of a discretionary trust, no part of the value of the trust's assets is assessable, until the trustee makes a distribution from the capital of the trust. This is because there is no way of apportioning a share of the assets of the trust to any particular beneficiary until the trustee has exercised their discretionary powers. When the assets of the trust are distributed to its beneficiaries, the amount received is an asset if it is not otherwise exempt. An example is the principal residence.

Assessment of assets from discretionary trust

The following table describes how the assets from a discretionary trust are assessed.

If a person is...	Then they...
a co-beneficiary of the assets of a discretionary trust	have an asset, however no value is placed on the asset for assessment purposes. The person's interest in the asset is dependent on the trustee deciding in what proportion to distribute the trust's assets.
the sole beneficiary of the assets of a discretionary trust	are generally considered to have the beneficial ownership of the trust's assets for assessment purposes. The terms of the trust deed must state that the person has an absolute interest in the distribution of the trust's assets before they can be assessed as the person's.

Couples

If a couple are the only beneficiaries of a discretionary trust, and the trust's assets are not exempt:

they are assessed as the couple's assets, and

each partner is assigned half of the assets.

Description of asset assessment for different roles within trusts

The following table describes the roles of individuals within a trust and the treatment of their trust related assets. A person may have more than one role and each needs to be considered separately.

Role	Description
Settlor	Is not usually entitled to a share of the trust assets, but deprivation of assets provisions may apply for gifts to the trust.
Contributor	Loans made to the trust are assessable assets, and deprivation of assets may apply for gifts to the trust.
Beneficiary	Has an interest in the assets of the trust at the trustee's discretion, therefore no amount is held as an assessable asset. Exception: Sole beneficiaries or a married couple who are the only 2 beneficiaries.
Trustee	Is not entitled to a share of the trust assets unless also a beneficiary, although asset(s) may be registered in their name.

Summary table of assessable assets

The following table summarises the assessment of assets from private discretionary trusts for pensions.

Type of Asset	Description
Interest in the trust's assets	Do not assess the trust's assets as assets of the person. The person has no entitlement until the assets are distributed by the trustee.
Beneficiary account	Assess as a financial asset of the person. The money is put in the account by the trust usually as reinvested trust distributions or interest. These may be called beneficiary loan accounts, current accounts or beneficiary current accounts. VEA → Section 5JA VEA VEA → (go back)
Loan to a trust	Assess as a financial asset of the person. The money has been loaned to the trust by the person. These may also be called beneficiary loan accounts or loans.
Assets gifted to a trust	Maintain the amount that was disposed of as a deprived asset for 5 years from the date of disposal, less the allowable gifting limit.