What is a discretionary trust?
A discretionary trust is a legal agreement that allows a person, known as the Settlor, to transfer assets into a trust, and have them managed by the Trustee, for the benefit of the Beneficiaries. This type of trust is called “discretionary” because the Trustee has discretion over how the assets are managed and who will get what benefit from the trust. In Oregon, the Trustee is given the authority to make decisions about the trust assets as long as they stay within the legal parameters that the Settlor and Trustee established when the trust was created. A common use of a discretionary trust is in the context of inheritance law. When someone dies, they may leave behind assets that they want to pass onto their heirs. However, the heirs may not be mature enough to handle the responsibility of the inheritance, or they may need the assets to be managed in a certain way. This is where the discretionary trust comes in. The Settlor (the deceased person) can set up a trust with a Trustee and Beneficiaries, and the Trustee will manage the assets according to the instructions the Settlor established. This is useful for ensuring that the Beneficiaries get the most benefit from the assets that the Settlor wanted to pass down.
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