A discretionary trust is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by trustor. Discretionary trusts can be discretionary in two respects. First, the trustees usually have the power to determine which beneficiaries (from within the class) will receive payments from the trust. Second, trustees can select the amount of trust property that the beneficiary receives. Although most discretionary trusts allow both types of discretion, either can be allowed on its own. It is permissible in most legal systems for a trust to have a fixed number of beneficiaries and for the trustees to have discretion as to how much each beneficiary receives.
Virgin Islands Discretionary Distribution Trust for the Benefit of Trustor's Children with Discretionary Powers over Accumulation and Distribution of Principal and Income Separate Trust for each Beneficiary
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FAQ
Discretionary distribution means a distribution which the trustee is not directed to make, but is permitted to make in the trustee's discretion. For example, the language in a trust instrument providing for a discretionary distribution may contain the words "may" or "in the trustee's discretion".
Typically, a bare trust holding cash will be around £1,000 plus VAT to set up. A lifetime discretionary trust or life interest trust designed to hold cash or investments will cost around A£1,000 plus VAT to set up. A personal injury trust to protect the award of a successful claim will cost A£1,700 plus VAT.
It is the generally accepted view that an object of a discretionary trust does not have a proprietary interest in the property of the trust they only have the right to compel the due administration of the trust estate and the right to be considered by the trustee. This is often described as a mere expectancy.
Some trusts contain provisions where the trustee can make uneven distributions to people in the same class of beneficiaries; this is called a sprinkling power.
When you set up a Discretionary Trust, you identify a class of beneficiaries such as children and/or grandchildren who can receive capital and/or income from the trust at the discretion of the Trustees. No one beneficiary has an absolute entitlement to either income or capital.
One of the primary drawbacks to using a trust is the cost necessary to establish it. This most often requires legal assistance. While some individuals may believe that they do not need a will if they have a trust, this is sometimes not the case.
Discretionary trusts disadvantages Complexity. Setting up and maintaining a solid discretionary trust structure can be complicated. Potential loss. Only profits are distributed losses remain as such. Trust.
A discretionary trust gives trustees the power to decide how much beneficiaries get from a trust and when they get it. All capital and income is distributed completely at their discretion. This means there's more flexibility and assets can be protected if circumstances change for any reason.