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 ?
2) Where a person creates for his own benefit a trust for support or a discretionary trust, his transferee or creditors can reach the maximum amount which the trustee under the terms of the trust could pay to him or apply for his benefit.
0504(2) means a spouse holding a judgment in the form of support cannot 1) force a distribution from a discretionary trust for the benefit of the spouse holding the judgment; and/or 2) garnish or otherwise reach or attach distributions from the discretionary trust before they are in the hands of the beneficiary .
He added: "There is no individual owner, that's the nature of discretionary trusts - it's a perfectly legal and much-used ownership structure in many different industries, not just football.
It makes certain provisions of the Florida Probate Code inapplicable to trusts and provides that a creditor of a beneficiary of a discretionary trust may not compel a distribution from a trust or reach a beneficiary's interest in the trust.
Geoff and Irene had chosen a Discretionary Trust Will, which is particularly popular as a way to cushion the impact of Inheritance Tax.
The SFT is a discretionary trust allowing the trustees to make decisions as to distributions to beneficiaries.
A Special Needs Trust stipulates which needs are to be satisfied, while a discretionary trust leaves it up to the trustee's discretion.
The possibilities include: a total discretionary trust, such as allowing trustees, within their discretion, to pay the income beneficiary trust income and/or trust principal; an inflation adjusted annuity trust; and a unitrust requiring fixed distribution of the trust corpus paid annually.
For instance, The Family Trust, a Pittsburgh-based company founded by the ARC (formerly known as the Association for Retarded Citizens) of Pittsburgh, offers three types of trusts: a pay-back special-needs trust, which pays back the state after the beneficiary dies; a common law or discretionary trust, and a pooled trust.
Creditor protection is at its greatest in a discretionary trust because the beneficiary is not entitled to receive distributions and is also unable to control the decision-making process about who may receive distributions.
One of the most efficient ways is to set up a Discretionary Trust as part of the wills so that on the first death liquid assets can pass into the trust up to the individual's personal allowance (currently pounds 231,000).