What is a discretionary trust?

Discretionary trusts are used because for tax reasons it is often more advantageous if assets can be held on trust by an independent trustee upon the terms and conditions specified in the trust deed.

The advantage of a discretionary trust is its flexibility. The trustee can allocate income according to the needs of the beneficiaries. Another advantage is that the trust can specify when the trustee should settle the trust (e.g. on the youngest beneficiary reaching the age of 18 years or completing school).

It is often used to provide for intellectually disabled children or to shield assets from family law property settlement. The choice of the trustee and appointor is crucial for the trust’s aims to be achieved.