What is a discretionary trust?

A discretionary trust is a legal arrangement in which the trustee (the person in charge) has the power to decide how much or how little of the trust’s funds and assets are distributed to the beneficiaries. This type of trust is usually set up by a person (the “grantor”) who is transferring their property or assets to a trust for the benefit of the beneficiaries. In California, this type of trust is regulated by the state’s Trusts and Estates code, which outlines certain rules and regulations that must be followed. As part of this code, the trustee is expected to use their discretion responsibly and fairly when distributing the trust’s assets to the beneficiaries. This means that the trustee must consider the beneficiaries’ needs, their age and maturity level, and the trust’s overall purpose when deciding how to distribute the assets. The primary benefit of a discretionary trust is that it allows the grantor to maintain control over the trust’s assets even after they are no longer living. This gives the grantor peace of mind that the assets are being handled responsibly and in a way that benefits the beneficiaries. Additionally, it can offer greater protection for the assets, as the trustee can choose to not distribute any funds that may be subject to creditors or lawsuits. In sum, a discretionary trust can be an effective way for a grantor to transfer their assets and ensure that those assets are managed responsibly. In California, discretionary trusts must be set up and run according to the rules and regulations outlined by the Trusts and Estates code.

Related FAQs

How do I name a beneficiary in a trust?
What are the advantages of a revocable trust?
What is the role of an attorney in an estate plan?
What is a trust distribution?
What is a trustee?
What is a guardianship?
What is a living will?
What is the difference between a will and a trust?
How do I wind up an estate?
What are the trusts for an estate plan?

What is a discretionary trust?

Related FAQs

Related Blog Posts