Legal Definitions - fixed trust

A fixed trust (sometimes called a non-discretionary trust) is a legal arrangement where the person creating the trust (known as the trustor or settlor) sets out very precise and unchangeable instructions for how the trust's assets are to be distributed to the beneficiaries. In this type of trust, the trustee, who manages the assets, has no flexibility or discretion to alter who receives what, how much they receive, or when they receive it. Their role is strictly to follow the detailed instructions laid out in the trust document, ensuring the assets are managed well and distributed exactly as specified.

• Example 1: Inheritance for Adult Children

  A parent establishes a trust for their two adult children. The trust document explicitly states that upon the parent's death, each child is to receive an equal 50% share of the trust's principal when they turn 30 years old. Until then, any income generated by the trust assets is to be divided equally and paid to them quarterly. The trustee's role is simply to manage the investments, pay out the income as scheduled, and then distribute the principal precisely when each child reaches the specified age. The trustee cannot decide to give one child more than the other, or to withhold payments if they believe a child is not managing their money well, because the terms are fixed.

• Example 2: Educational Fund

  A grandparent sets up a trust to cover their grandchild's university tuition and living expenses. The trust specifies that the trustee must pay up to $25,000 per year directly to the university for tuition and provide an additional $1,500 per month to the grandchild for living costs, for a maximum of four years, provided the grandchild maintains a certain GPA. The trustee has no power to increase or decrease these amounts, nor can they decide to pay for a different type of education (like vocational training) if the grandchild changes their mind. Their duty is to disburse the exact amounts for the specified purpose and duration, as long as the conditions are met.

• Example 3: Charitable Endowment

  A philanthropist creates a trust designed to support specific causes. The trust document mandates that $50,000 must be paid annually to "The Local Arts Council" and $25,000 annually to "The Regional Wildlife Fund" for a period of ten years. The trustee is legally bound to make these exact payments to these specific organizations each year, regardless of any changes in the organizations' financial health or the trustee's personal opinion about their effectiveness. The trustee cannot divert funds to a different charity or alter the payment amounts or schedule.