Help with Family, Finances

and the Future

Why a discretionary trust may be more flexible

On Behalf of | Jun 6, 2024 | Estate Planning |

If you have a specific goal in mind for the inheritance that you are leaving to the next generation, you may want to use a trust. For instance, maybe a new grandchild was just born. You know how important it is for that child to get an education, but it may be very expensive 18 years from now. You could set up an educational trust that will pay for their tuition and other costs.

Another option, however, is to use a discretionary trust. Essentially, the trustee is allowed to use their own discretion and make prudent decisions. You are telling the trustee that, while you may not want the beneficiary to have full control over how they use the money, you do trust the trustee to make decisions you would agree with.

Why this can be beneficial

One of the main benefits of a discretionary trust is that the trustee can adapt to the current situation. They can be flexible and they don’t have to follow a strict set of predetermined rules.

For example, perhaps that grandchild will go to college, and the trustee can simply pay for their tuition. But maybe they will decide to join the military or start a small business.

If the trust says that the money can only be used for educational costs, that can be very limiting. However, a discretionary trust would allow the trustee to make distributions for other reasons, such as investing in the grandchild’s new business or helping them buy a family home while in the military. 

Estate planning gives you many different tools to accomplish your specific goals. Just be sure you know what tools will work best in your unique situation.