What is a discretionary trust?
A discretionary trust is a type of trust used in Disability Planning Law in North Carolina. It is designed to protect assets for individuals with disabilities or special needs, without disqualifying them from receiving public assistance. The trust is discretionary, meaning the trustee (the appointed individual or organization that manages the trust) has the discretion to decide how and when the assets in the trust should be used, taking into account the individual’s needs and other financial resources. This enables the individual to benefit from the trust while still qualifying for public benefits. The trust must be carefully structured so that it does not interfere with the individual’s eligibility for public assistance. To do this, the trustee cannot provide funds directly to the individual, but must provide them for their benefit. The trust must also include a “spendthrift” clause, which prevents creditors from seizing the trust assets. The trust can be used to provide for the individual’s needs while preserving public benefits. It can also provide for future needs, such as education, job training, and other life expenses, without disqualifying the individual from public assistance. When drafting a discretionary trust, it is important to follow North Carolina’s laws and regulations to ensure that the trust is structured correctly and does not interfere with public assistance benefits. Additionally, it’s recommended that a qualified professional be consulted to ensure that the trust is drafted according to the individual’s needs.
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