Discretionary Trust Wills

Overview

A Discretionary Trust is a flexible trust arrangement. You appoint trustees to manage the trust and give them ultimate discretionary over who gets what and when. No beneficiary in a discretionary trust has a fixed entitlement.

You can place some or all of your estate into this trust to provide for vulnerable loved ones. You choose the beneficiaries of the trust and then give the Trustees the power to make decisions over who actually receives anything from that trust.

Advantages of a Discretionary Trust

• Trustees have complete discretion over who benefits from the Trust. This gives you flexibility if you have not decided who should take the assets or in what proportions.
• If you lose capacity to change your Will prior to your death, it gives your Trustees the flexibility to distribute your assets as they see fit.
• If you want to protect assets from children inheriting at 18 if you feel they will squander money in an irresponsible way.
• Protects assets from third parties such as a beneficiaries divorced spouse or creditors from bankruptcy. As the beneficiaries do not have a legal entitlement to any asset in a Discretionary Trust, they do not form part of their estate and cannot be taken into account for divorce or bankruptcy proceedings.
• If you do not want your detailed wishes to be public knowledge after your death.

Disadvantages of a Discretionary Trust

• Loss of control. The Trustees have the ultimate say about who receives what and when. You can leave a Letter of Wishes advising the Trustees how you would like your estate distributed, however there is no obligation on the Trustees to follow those wishes.
• Beneficiaries may be left out and can cause family disputes.
• Legal fees involved in setting up and running a trust can be costly.
• Costs involved to filing annual tax returns and issuing tax certificates to beneficiaries who have received income.