What is a discretionary trust?

A discretionary trust is a type of trust set up in the state of Oregon in which the trustee has the discretion to decide how the trust assets are managed and distributed. This type of trust is often established with somebody’s estate, such as a parent or grandparent, as part of the estate planning process. In a discretionary trust, the trustee has the authority to decide how income and assets are distributed. Generally, the terms of the trust state that the trustee should consider the needs of the beneficiaries first, before distributing the assets according to the trustor’s wishes. The trustee also has the discretion to decide when and how much to distribute to the beneficiaries. The amount of discretion the trustee has may depend on the terms of the trust and the trustee can only act within the confines of the trust. A discretionary trust provides for flexibility and control that other types of trusts may not offer. The discretion the trustee has over the trust can help protect the assets of the trust from creditors or other legal actions. It can also help manage distributions to ensure the needs of the beneficiaries are met, while still respecting the wishes of the trustor.

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