What is a discretionary trust?
A discretionary trust is a legal arrangement in North Carolina that allows a person to establish a trust fund and set up a trustor, a trustee, and a beneficiary. The trustor is the person who sets up and funds the trust, and the trustee is the person who is responsible for managing the trust. The beneficiary is the individual who stands to benefit from the trust. The trustor can set up the trust however they wish, but a discretionary trust typically contains a clause that allows the trustee to distribute different amounts of the trust fund to the beneficiary at their own discretion. When this is done, the beneficiary does not have any rights to the trust fund, and the trustee is free to distribute the trust fund as they see fit. The flexibility of discretionary trusts provides a trustor with the ability to plan their estate in such a way that they can direct the benefits of the trust in ways that are not legally possible with other types of trusts. For example, they can use the trust to provide for someone who may not otherwise be able to receive an inheritance, or they can use the trust to protect assets from creditors or from taxation. Discretionary trusts are an important tool for estate planning, and anyone interested in setting up a trust should consult with an experienced attorney to ensure it meets all of their needs.
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