A Discretionary Trust Will, sometimes referred to as a discretionary trust within a will or testamentary discretionary trust, is a legal document that establishes a trust to manage assets and distribute them to beneficiaries at the discretion of the trustee. In this type of will, the testator (the person making the will) creates a trust within their will, and the trustee (appointed by the testator) is given the authority to decide how the assets within the trust will be distributed among the beneficiaries.
Key features of a Discretionary Trust Will include:
Flexibility: The trustee has discretion over how and when to distribute the assets among the beneficiaries. This flexibility allows the trustee to consider the individual circumstances and needs of each beneficiary, as well as changing circumstances over time.
Asset Protection: Assets held within a discretionary trust are generally protected from certain risks, such as creditors or potential legal claims against the beneficiaries. This can be particularly useful for beneficiaries who may be vulnerable or have uncertain financial situations.
Tax Planning: Discretionary trusts can offer tax planning benefits, as the trustee can strategically distribute income and capital gains to beneficiaries in a tax-efficient manner, potentially reducing the overall tax liability of the trust and its beneficiaries.
Control: The testator retains control over the trust by specifying the terms and conditions under which the trustee can distribute the assets. This allows the testator to protect the assets and ensure they are used for the intended purposes.
Discretionary Trust Wills are commonly used in estate planning to provide for beneficiaries who may not be capable of managing significant assets on their own, or to protect assets from potential risks or uncertainties. They offer a flexible and customization approach to estate distribution, allowing the testator to tailor the trust to the specific needs and circumstances of their beneficiaries.