What is a discretionary trust
A discretionary trust is a type of trust where full discretion is used by the nominated trustee to decide how the beneficiary or beneficiaries of the trust will acquire the assets held in the trust. Deciding on the type of trust you should create in order to meet your needs can difficult and so it is highly advised to seek the professional assistance of a consultancy firm that are experienced in the formation of trusts on a global scale.
For more information on the types of trusts available, please click on the following link to view our Offshore Trusts page.
Discretionary trust explained
As mentioned, a discretionary trust allows the trustee to conduct the administration of the trust using full discretion as to what the trustee deems appropriate. This means that the trustee can decide how to distribute income of capital from the trust to the trust beneficiaries. Normally, it is only when the trustee activates distribution of trust assets to the beneficiaries that the beneficiaries have any interest in the trust.
A discretionary trust is also known as a family trust and is typically set up by a family member for the benefit of other family members, such as parents setting up the trust for the benefit of their children.
There are many reasons why a discretionary is formed, some of these reasons include:
- Highly effective in terms of asset protection
- The trustee is given the full discretion to distribute the trust assets as he/she sees fit.
- Generally favorable legislation
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