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Simple English definitions for legal terms
nondiscretionary trust
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A quick definition of nondiscretionary trust:
A nondiscretionary trust, also called a fixed trust, is a type of trust where the person in charge of managing the assets, called the trustee, has no power to make decisions about how the assets are distributed. The person who created the trust, called the trustor, decides exactly how the assets will be given to the beneficiaries. The trustee's job is to make sure the assets are managed well, but they cannot change what the beneficiaries receive.
A more thorough explanation:
Nondiscretionary trust
A nondiscretionary trust, also known as a fixed trust, is a type of trust where the trustee has no power to make decisions about how the assets are managed or distributed. The trustor specifies exactly how the assets are to be distributed, and the trustee must follow those instructions. While the trustee is responsible for managing the assets for financial success, they cannot change what the beneficiaries receive.
One example of a nondiscretionary trust is a trust set up to provide for a child's education. The trustor may specify that a certain amount of money be distributed each year to pay for tuition, books, and other educational expenses. The trustee is responsible for managing the assets in the trust to ensure that there is enough money to cover these expenses, but they cannot use the money for any other purpose or change the amount of money that is distributed each year.
Another example of a nondiscretionary trust is a trust set up to provide for a disabled family member. The trustor may specify that a certain amount of money be distributed each month to cover the person's living expenses and medical bills. The trustee is responsible for managing the assets in the trust to ensure that there is enough money to cover these expenses, but they cannot use the money for any other purpose or change the amount of money that is distributed each month.
These examples illustrate the concept of a nondiscretionary trust because in both cases, the trustee has no power to make decisions about how the assets are managed or distributed. The trustor has specified exactly how the assets are to be used, and the trustee must follow those instructions. While the trustee is responsible for managing the assets for financial success, they cannot use the money for any other purpose or change the amount of money that is distributed each year or month.