What is a discretionary trust?
A discretionary trust—also known as a spendthrift trust—is a legal arrangement created in the state of Michigan to manage a person’s assets for financial and estate-planning purposes. It is a type of trust where the trustee—the person responsible for managing the trust—has a great deal of discretion in deciding how to use the trust’s assets. In a discretionary trust, the trust’s assets are managed for the beneficiary’s benefit, but the trustee—who is typically a family member or a professional financial advisor—has control over how the trust’s assets are used. The trustee is able to decide how to invest the trust’s assets and can make decisions about when and how much of the trust’s assets to provide to the beneficiary. While some trusts have specific conditions or qualifications that must be met in order to receive funds from the trust, discretionary trusts are not subject to the same restrictions. This provides the beneficiary with a greater degree of financial protection since the money will remain in the trust instead of being vulnerable to creditors or other financial claims. In addition, discretionary trusts can also be used for tax planning purposes. When properly set up, discretionary trusts are not subject to the same taxes that individuals would be subject to when they receive funds from the trust. This can help save the beneficiary and/or the trust significant amounts of money in taxes. Discretionary trusts can be an excellent tool for individuals in Michigan to protect their assets and are an important estate planning tool for those who wish to secure their family’s financial future.
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