Have you thought about using a discretionary trust created in your lifetime as a way of protecting your family's assets in the future? An increasing number of people have used discretionary trusts to reduce the risk of losing capital assets. Discretionary trusts can be a good option for high net worth families who are looking for ways to secure their assets.

Discretionary trusts can also be a useful way of protecting family wealth when children marry – ensuring assets are protected in the unhappy event of a subsequent divorce. Subject to how much you have previously gifted, a total of £325,000 may be put into a discretionary trust by each parent during their lifetime. Provided that the combined value of your gifts made by each spouse in the last 7 years including the gift into a discretionary trust is below £325,000 an Inheritance Tax (IHT) charge will not immediately be put on to this sum, although there may be periodic IHT charges during the life of the discretionary trust.

A discretionary trust ensures you and your spouse are in full control of all assets by appointing yourselves as the trustees. You then decide who benefits from the trust, such as children and grandchildren, with the necessary provisions for more to be added as your family situation changes.

As trustees, you are able to transfer assets from the trust, though there may be tax implications to consider.This flexibility allows you to 'trickle down' your wealth to your children as they grow older. Your feelings about the longevity of a child's marriage may also change leading to a change in your gifting strategy in relation to the trust. Alternatively, you may wish to continue with the trust for a prolonged period. A trust can continue for a number of generations.

Prenuptial agreements are often cited as a means of securing possessions in the event of  marriage break down. A prenuptial agreement is not, however, legally binding, although a Court may take one into account. There is still  a stigma attached to them, that  prevents engaged couples and their families from  discussing them. The same cannot be said of discretionary trusts, which are viewed more as a planning tool for the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.