Discretionary trust

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Discretionary trust

In the context of mutual funds, refers to a mutual fund or unit trust whose management decides on the best way to use the assets without restriction to a specific type of security.
In the context of trusts, refers to a personal trust in which a trustee has the power of decision as to how much income or principal each beneficiary receives.

Discretionary Trust

A trust in which a trustee is able to make decisions without the need to consult others. For example, a discretionary trust gives the trustee the right to make significant investment decisions without permission from or even consultation with the trustor or the beneficiary. However, the trustee has a fiduciary responsibility to manage the assets as well as possible; decisions made in a discretionary trust must be made in accordance with the prudent man principle.
References in periodicals archive ?
It Is Safer to Create a Discretionary Trust in a State that Clearly Addresses Exception Creditors--Based upon Bacardi and the "unofficial and independent" comments by members of the trust code drafting committee, it appears that although an exception creditor may attach a present or future distribution to or for the benefit of the beneficiary of a trust other than a discretionary trust, regardless of whether the trust contains a spendthrift provision, such exception creditor cannot compel distributions from or otherwise reach beneficial interests in discretionary trusts.
Harvey told the committee: "I don't know who the beneficiaries of this discretionary trust are, no.
If a Will includes a Nil-Rate Band Discretionary Trust and on the first death it is decided that the trust is no longer appropriate, then it is possible to bring that trust to an end and to pass the whole of the trust fund to the surviving spouse/civil partner who will then be free to use the assets.
There is no right or wrong answer as to whether you should change a nil-rate band discretionary trust will if you have already made one.
As indicated above, a trustee of a true discretionary trust has virtually complete authority over trust distributions.
This article deals primarily with total discretionary trusts in which the settlor's grandchildren are the ultimate beneficiaries (i.
It is common knowledge that inheritance tax savings in wills can be achieved by passing the nil rate band ( the maximum amount you can leave without paying inheritance tax ( into a discretionary trust on the death of the first spouse.
One option outlined by Mr Walker at Morton Fisher is to include your house in a Discretionary Trust rather than make it over as a direct gift.
Now, with some exceptions, they will be taxed under the regime that applies to discretionary trusts.
The changes introduced by the Finance Act have brought the Inheritance Tax treatment of IIP trusts and A&M trusts broadly in line with Discretionary Trusts.
As with all discretionary trusts there is a tax charge every 10 years but this may be avoided if sums are paid out to beneficiaries before the first 10 year anniversary of the Trust creation.