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What are discretionary trusts?

On Behalf of | Sep 21, 2023 | Trusts |

Trusts can play a vital role in estate planning. As they do not pass through probate the beneficiaries of the trust can receive anything in them far faster. If of course, you want them to receive things straight away.

How and when a trust gets distributed depends on the rules you set when creating it. If you do not want someone to receive a cent until they turn 25 years old, you just put it the rules. If you only want the money to be used to pay for their college fees and only if they follow in the family tradition and study medicine, you again stipulate that when making the trust.

Yet many people would prefer not to be so specific. After all, it is impossible to see into the future. What if something comes along that you would be more than happy to see the money used for if only you were still alive to make that decision? This is where a discretionary trust comes in.

You leave the trustees to make the decisions

You can give the trustees complete free reign to determine when and how to distribute the assets, or you can narrow their choices to a certain range of options, or just lay down some general guidelines. Regardless, the trustees cannot benefit from the trust themselves.

While all trustees have a lot of responsibility, those in charge of a discretionary trust have even more so you need to be careful to choose the right person. You might even prefer to choose several co-trustees because sometimes two or more heads are better than one. You can add another layer of security by naming appointers to watch over the trustees and check they are acting appropriately. They can seek to remove the trustees, if needed.

Learning more about all the estate planning options available can help you make appropriate choices.