Legally speaking, a trust is a kind of relationship between a trustee and the beneficiaries. In this relationship, the trustee is obligated to hold property, items, or asset/s for the beneficiaries. In a discretionary trust or family trust, the trustee is tasked to hold and oversee that the assets, property, or income stated in a trust deed are distributed accordingly among the beneficiaries. It is also in the nature of a discretionary trust that the beneficiaries are not entitled to a fixed amount unless it is stated and they do not have interests in the trust fund.

Purposes Of A Discretionary Trust

A discretionary trust is made in order to handle the property, assets, or income included in the trust deed until they are properly distributed among beneficiaries. This legal relationship also aims to protect the assets, property, and income during legal disputes especially if a will is challenged by one of the beneficiaries or by a third party. Through this legal agreement, all of the terms of a trust deed is to be executed accordingly to the laws that govern a family trust.

Key Aspects Of A Discretionary Trust

In order for you to fully understand the nature of a discretionary trust, having a basic grasp of its aspects is helpful. In this relationship, the appointor, as indicated in a trust deed, is the one who has the authority to appoint or remove a trustee. This person is also authorized to remove or appoint beneficiaries and to approve the distribution of the assets, property, and income. The person who formulates the trust by putting an amount of money, income, or property into the trust is referred to as the settlor.

The trustee is an individual appointed by the appointor. A trustee is tasked to carry out the transactions that involve the trust and the distribution of the income or property. As a trustee, you are bound by the terms and rules indicated on a trust deed. You are also to act in the interests of the beneficiaries as a trustee. Your duties as a trustee also include proper accounting of all the property, income, or assets to be distributed and to make sure that the taxation laws regarding a trust are followed accordingly.

Beneficiaries can be individuals or entities to whom the trust property is to be distributed to. As a beneficiary, you don't have any control over the distribution of the property or income stated in the deed.

A trust deed states the relationship among the beneficiaries and the trustee. This legal document also discusses in detail the legal powers and duties of a trustee. All of the property, income, or assets entrusted to a trustee as indicated in the trust deed are referred to as the trust fund.

How To Set Up A Discretionary Trust

It's best to contact a professional adviser if you are interested in setting up a trust. When looking for a professional adviser who can help you out when creating a discretionary trust, the Internet is a very useful tool. There are many websites and online companies that offer various trust management services.