June 19th, 2017
Discretionary trusts ensure that loved ones left behind will be taken care of.
Discretionary trusts commit the trustee, whether that should be a company or an individual, to handle the assets of a deceased person for the benefit of the beneficiaries. These assets usually take the form of finance or property.
The trustees, those who are charged with handling the discretionary trusts, also have the legal discretion of how they are distributed. The trusts may also accumulate income to increase the benefit to the beneficiaries.
As part of the trustee’s role, they may decide:
- How much money is paid out and to whom.
- The regularity of the payments may also be decided by them as well as any conditions which may have to be met.
- There may, in some circumstances, be situations where some income may be used by the trustees for the benefit of the beneficiaries.
The essential role of a trustee is to carry out the wishes of the person who has set up and put assets into the trust. They are subsequently known as the ‘settlor’. This person’s wishes are usually recorded in either their will, or a trust deed.
Trusts are often used to ascertain that the assets of the deceased are left to the person or persons that they have requested. This enables them to protect family assets such as property and jewellery. If a trust is to be set up, as requested in a will or trust deed, this allows assets to be distributed as requested after the person has died.
There are many reasons for setting up a trust.
- In the case of a minor being the beneficiary of a deceased’s assets, a trust can protect the money until they are old enough to be responsible for it.
- This age is sometimes specified in the will and may be over the age of eighteen.
- The same applies if a person is deemed not to be of sound mind to inherit the assets for their own use. The trust can provide for their well being from the funds therein.
The trust deed can also set out the terms and conditions regarding the extent of the role of the trustee. In some instances, the settlor, the person who has set up the trust, will set some capital aside for future unknown events such as for a grandchild’s future.