Friday, May 10, 2013

Discretionary Trusts vs. Non-Discretionary Trusts

When setting up a trust that will go on after the death of the settlor, there are basically 2 kinds of trusts:  Discretionary and non-discretionary.

A Discretionary Trust gives the trustee the discretion to distribute to or pay for the benefit of the beneficiaries what the trustee decides is within the purpose of the trust.  For example, the trust may set aside money for education, but the final decision is in the trustee's discretion.

A non-discretionary trust is one that requires the trustee to make a certain distribution and the trustee has no discretion at all.  For example, the trust may require the trustee to make a payment of $50,000 each year on a set date, e.g., January 1.

 Dwight Edward  Tompkins,
Orange County Living Trust Attorney.