What is a discretionary trust?
A discretionary trust is a type of trust used in Maryland inheritance law that gives a designated trustee discretion to decide who receives a portion of the trust property. This type of trust document does not require the trustee to give out all the assets in the trust; rather, the trustee has the option to distribute some or all of the assets as they see fit. Discretionary trusts are often used when there are multiple beneficiaries, or when the trust creator cannot decide who should receive the trust property. The primary benefit of a discretionary trust is that it can allow a trustee to make decisions that are best for the beneficiaries, rather than having the decision made by a court. Discretionary trusts can also provide beneficiaries with inheritance tax relief. Additionally, they can enable trustees to delay distributions to minors or other beneficiaries who are not capable of managing wealth, or to delay distributions so that the benefits can be invested for a longer period of time. In Maryland, a discretionary trust must be specifically authorized and structured in order for it to be legally binding. This is usually done by creating a trust document known as a Declaration of Trust. The requirements for creating a valid trust document can vary depending on the type of trust, so it is important to seek professional legal advice when creating or managing a discretionary trust.
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