Discretionary Trust Tax (DTT)

Beneficiaries of a discretionary trust

If you are a beneficiary (object) of a discretionary trust, you are not immediately entitled to any benefit from the trust. Any charge to Capital Acquisitions Tax (CAT) is postponed until the trustee(s) exercise their discretion and make an appointment to you.

If you receive an appointment from a discretionary trust, a charge to CAT may then arise. For CAT purposes, you are treated as taking a gift or inheritance from the person who placed the property on trust, not from the trustee(s).

The date of the gift or inheritance will generally be the date that the appointment is made. The tax-free group threshold amount and rate of tax that applies will be those in place at the date of the gift or inheritance.

If you receive an appointment of an asset held in a discretionary trust the trustees may incur Capital Gains Tax (CGT) on the disposal. Where this occurs, you may be entitled to a credit for any CGT paid by the trustee(s) against your CAT liability. For further information please see Credit for Capital Gains Tax.

The charge to Discretionary Trust Tax (DTT) is separate to the charge to CAT. A charge to CAT may arise on the appointment of trust property to a beneficiary, even though a charge to DTT had not yet arisen.

  • Example 1

    Catherine died on 4 March 2024. A discretionary trust was created under the terms of Catherine’s will. The will trust named Catherine’s sister Veronica as the trustee and gave Veronica discretion as to when appointments were to be made. Catherine’s will settled three residential apartments and €500,000 into the trust.

    There were two beneficiaries (objects) of the trust, Catherine’s daughter Rebecca and her son George. Rebecca and George, who are principal objects for the purposes of DTT, were over the age of 21 at the time of Catherine’s death.

    The property is deemed to become subject to the trust on the date of Catherine’s death, 4 March 2024. For the purposes of the initial 6% charge, the latest date is the 4 March 2024, the date of Catherine’s death. The trustees paid the DTT due and filed a Form IT 4 on the 7 June 2024.

    Rebecca and George have no immediate entitlement to the property held in the trust on Catherine’s death. Rebecca and George do not take an inheritance from Catherine in 2024.

    On the 3 March 2025 Veronica exercised her discretion and appointed Apartment A to George. Apartment A was valued at €500,000 on the 3 March 2025. George is treated for CAT purposes as taking an inheritance of Apartment A from Catherine. The date of the inheritance for CAT purposes is 3 March 2025, the date the appointment was made. George is required to file a Form IT38 and pay the CAT due by 31 October 2025.

    On the 5 January 2026 Veronica exercised her discretion and appointed Apartment B to Rebecca. Apartment B was valued at €550,000 on the 5 January 2026. Rebecca is treated for CAT purposes as taking an inheritance of Apartment B from Catherine. The date of the inheritance for CAT purposes is 5 January 2026, the date the appointment was made. Rebecca is required to file a Form IT38 and pay the CAT due by 31 October 2026.

Note

Normally the date of an inheritance is the date of death of the disponer. However, where property is appointed by a trustee from a discretionary trust, the date of the inheritance is generally the date of the appointment. 

 

  • Example 2

    Diarmuid set up a discretionary trust during his lifetime. In 2022 he settled a residential property and cash into the trust. The trust deed named Diarmuid’s brother Liam as the trustee and gave Liam discretion as to when appointments were to be made.

    There were two beneficiaries (objects) of the trust, Diarmuid’s granddaughter Fiona and his grandson Patrick. Fiona and Patrick are not principal objects for the purposes of Discretionary Trust Tax.

    Fiona and Patrick have no immediate entitlement to the property held in the trust. Fiona and Patrick do not take a gift from Diarmuid in 2022 when the property was settled into the trust.

    On 11 June 2025 Liam exercised his discretion and appointed €100,000 cash to Fiona. At the time the appointment was made the initial 6% DTT charge had not arisen, as the disponer, Diarmuid was alive on that date.

    Fiona is treated for CAT purposes as taking a gift of €100,000 from Diarmuid. The date of the gift for CAT purposes is 11 June 2025, the date the appointment was made.

    Assuming Fiona had not taken any other gifts from Diarmuid in 2025 she will be able to avail of the small gift exemption. Fiona is required to file a Form IT38 and pay the CAT due by 31 October 2025.

Published: 16 September 2026 Print this page

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