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Simple English definitions for legal terms
discretionary trust
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A quick definition of discretionary trust:
A discretionary trust is a type of trust where the person in charge (called the trustee) can decide how much money or property to give to the person who will benefit (called the beneficiary). The beneficiary doesn't actually own anything in the trust, so nobody can take it away from them. This means that the trustee has complete control over the money or property in the trust, and the beneficiary can only hope to receive some of it.
A more thorough explanation:
A discretionary trust is a type of trust where the trustee has the power to decide how much of the trust's income and assets should be given to the beneficiary. The beneficiary does not have a guaranteed right to receive any specific amount of money or property from the trust.
Let's say that John sets up a discretionary trust for his daughter, Jane. John names his sister, Sarah, as the trustee of the trust. The trust document states that Sarah has the power to decide how much of the trust's income and assets should be given to Jane. Jane does not have a guaranteed right to receive any specific amount of money or property from the trust.
Another example could be a wealthy individual setting up a discretionary trust for their grandchildren. The trustee would have the power to decide how much money or property should be given to each grandchild, and the grandchildren would not have a guaranteed right to receive any specific amount.
These examples illustrate how a discretionary trust works by giving the trustee the power to make decisions about how much money or property should be given to the beneficiary. The beneficiary does not have a guaranteed right to receive any specific amount, which means that the trust assets are protected from creditors and cannot be voluntarily transferred.