What is a discretionary trust and how does it provide asset protection benefits?

A discretionary trust, also known as a spendthrift trust, is a type of trust that is designed to protect assets from creditors. Under this type of trust, a trustee is appointed to manage the trust assets and to make distributions to beneficiaries according to the terms of the trust. The trustee has the discretion to make distributions of income and principal at their own discretion. This means that beneficiaries cannot compel the trustee to make distributions to them, therefore protecting assets from creditors who might otherwise be able to attach those assets if they were owned by the beneficiary. Discretionary trusts also provide asset protection benefits by allowing the trust assets to remain out of the reach of creditors. Under New York law, creditors are generally not able to attach trust assets to satisfy the debts of the beneficiary. Furthermore, the income and investments in the trust are usually taxed at a lower rate than the beneficiaries would be if they held the assets directly. Finally, the terms of the trust can be structured to protect the assets and ensure that they are passed on to future generations. In summary, a discretionary trust is an effective way to protect assets from creditors and to minimize the tax burden that would otherwise be imposed if these assets were owned directly by the beneficiaries. It is an invaluable tool for protecting assets and is an important part of asset protection law in New York.

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What is a discretionary trust and how does it provide asset protection benefits?

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