Discretionary Trust

• how much is paid out
• to which beneficiary or class of beneficiaries payments are made
• how often the payments are made
• what, if any, conditions to impose on the recipients

Under the terms of the deed that creates the trust, there may be situations when the trustees are required to use income for the benefit of particular beneficiaries.

Trustees carry out the wishes of the person who has put assets into the trust. This person is known as the 'settlor'. The settlor's intentions for the trust are usually expressed in a legal document called a 'trust deed' or in their will.

Trusts may offer a means for individuals to pass on their wealth to people they have chosen. As such, they may be used to control and protect family assets. If a will establishes a trust, this may allow people to pass on their assets in accordance with their wishes when they die.

A trust might be created in various circumstances:

• when someone is too young to handle their affairs
• when someone can't handle their affairs because they are incapacitated
• to pass on money or property while you are still alive
• under the terms of a will - referred to as a 'will trust'

However, they may still retain discretion about how and when to pay.

The extent of the trustees’ discretion depends on the terms of the trust deed. Sometimes the person who sets up the trust - the settlor - will use a discretionary trust to set aside capital for:

• a future need that may not yet be known, for example a grandchild that may require more financial assistance than other beneficiaries at some point in their life
• beneficiaries who are perhaps not capable or responsible enough to deal with money by themselves