What Are Discretionary Trusts?

Discretionary Trusts are trusts in which the beneficiaries and the entitlements are determined by the settler and are not fixed. These trusts are known with this name because the trustees generally a power to decide which of the beneficiaries will receive the payments and they also have the power to select the amount that the beneficiaries will receive. Both these powers are usually exercised by the trustees but they also have the option to use only one.

In this way, the trustees have a good amount of freedom to make decisions about the resources of the trust. The trustees are allowed to increase or decrease the monthly allowances of the beneficiaries. This kind of trust encourages the trustees to concentrate all the available assets of the trust into a single pool and then disburse them into all the beneficiaries with proper understanding. The best thing is that no single person makes any decision and thus, the whole trust is able to make an unbiased and fair decision.