In a Discretionary Trust, the trustees have the decision-making power to decide which beneficiary receives the funds from the trust and up to what amount. This kind of control and decision-making power involves the trustee having a lot of power, so selecting a trustworthy (no pun intended), responsible trustee is particularly important with this type of trust.
The purpose of a discretionary trust is to adjust to the needs of any given beneficiary at any time the trustee sees fit. For example, if a young adult is in school and gets a certain amount from the trust each month, but has additional educational expenses, the trustee can allow for additional funds to be dispersed to the beneficiary for those expenses. A discretionary trust can have a group of beneficiaries or just one. It is up to the creator of the trust to decide who is a beneficiary.
Assuming you are the trust creator, it’s also up to you to decide how much discretion to give to trustees – that is, what decisions can they make. One important decision you may want to allow your trustees to make is whether or not to exclude any of the beneficiaries. You could leave this totally up to the discretion of the trustees or you could write down some situations in which the trustee may have this authority, such as trouble with the law, drug use, etc. In extraordinary circumstances, the trustee may even be able to add beneficiaries to the trust, but the trustees are usually limited to the being able to change the amount of money that the beneficiary receives.
Another responsibility that a trustee generally has in regards to the discretionary trust is to ensure the continued investment of the trust’s assets so that the beneficiaries can enjoy ongoing financial support from the trust. These also can be regulated by the trust document, as the creator wants to be sure that the assets held in trust are protected and not lost on bad investments.
The creator of the discretionary trust can decide as much as they want to decide in terms of the trustee’s decision making allowances, the amounts given, beneficiaries having money reduced, etc. They just need to be sure that all of their wishes regarding the trust and its disbursement is written down, signed by them, and documented. Only then can the trustee carry out the creators wishes the way he/she want them carried out.
If you are going to create a discretionary trust, it is important to know what your options are, and generally what the process of setting up the discretionary trust is. Once you are comfortable with this information and are ready to proceed, you will want to enlist the services of a lawyer. The laws related to trusts can be very complicated and vary from state to state and country to country. A qualified lawyer in your area will help you set up a trust that will be sure to protect your loved-ones according to your wishes for the life of the trust.