What is a Discretionary Trust (Family Trust)?

Question

What is a Discretionary Trust (Family Trust)?

Answer

In a Discretionary Trust, the beneficiaries do not have an interest in any of the trust assets - i.e. there is less (or no) certainty in relation to their entitlements to any trust income or capital (cf unitholders in a unit trust). Rather, the trust deed will define a "pool" of potential beneficiaries, and the trustee is then often given absolute discretion (within the terms of the trust deed) to determine which of these beneficiaries are to receive the capital and income of the trust, and how much. 

In saying that, a default (designated) beneficiary does have a contingent interest in the trust assets i.e. contingent upon the trustee not otherwise exercising its discretion to distribute. 

The setting up of a Trust is not done through ASIC or any other government body. Trusts are established by the execution of the trust deed (signed, dated, stamped).

 

Further Information

Who are the parties to a Discretionary Trust?

 

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