What is a discretionary trust?
A discretionary trust is an estate planning tool used to pass down wealth and assets to beneficiaries. It is commonly used in California to provide financial security for family members. Discretionary trusts are established by the grantor (the person who creates the trust). The grantor designates a trustee, who is responsible for managing the trust. The grantor also specifies how and when the trust can be used. The grantor decides how the trust’s assets will be distributed, but the trustee has the authority to make discretionary decisions. This means the trustee can decide how the trust’s assets will be used at their own discretion, as long as it meets the grantor’s desired goal. This makes discretionary trusts an attractive tool for estate planners, as the trustee has the flexibility to adjust their decisions to fit the changing needs of the beneficiaries. Discretionary trusts can also offer favorable tax advantages in California. First, the income generated by the trust is generally not taxable, meaning any money earned while the trust is in existence will not be taxed. Additionally, discretionary trusts also give the grantor and trustee the ability to distribute assets in a way that minimizes the beneficiary’s tax liabilities. Discretionary trusts are an important tool in estate planning that can provide financial security and tax benefits to family members in California. They are complex trusts and should always be set up with the help of a qualified attorney.
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