Discretionary Trusts and the Important Decisions You Will Have to Make

As you sit down with your attorney to discuss your estate planning needs and goals, you may feel overwhelmed by the many options available to you. Deciding whether or not to use a trust as part of your estate plan is one important step. The next step is to determine exactly what type of trust is right for you and your family. One example of the many types of trusts that can be used is a discretionary trust. Your attorney can help you assess whether a discretionary trust meets your goals and wishes.

An Overview of Discretionary Trusts

What is a discretionary trust? A discretionary trust is a trust that gives control to the trustee over distributions of the trust assets to the beneficiaries. For example, some of the trust assets may generate income. A true discretionary trust will allow the trustee to decide whether that income should be distributed to the beneficiaries of the trust, or whether it should be added to the principal of the trust. It is important to remember that if a trustee opts to hold the trust income in trust after the first year, he is not required to make that same choice for any future years.

When creating your discretionary trust, you will have to make the following decisions:

  1. Who you would like the trustees to be after you pass away. This is a very important choice because the trustees will be in charge of making these important discretionary decisions.
  2. Who the income beneficiaries are if the trustee opts to distribute trust income rather than add it to principal.
  3. Who the remainder beneficiaries are when the trustee ultimately distributes all of the trust principal.

Discretionary trusts have many tax, asset protection, and estate planning benefits. However, they are not right for every situation. To learn more about how we can help you make these important decisions, we encourage you to view our client testimonials page today.

James F. Roberts
Founder and owner of the Law Office of James F. Roberts and Associates, a premiere estate planning law firm