Discretionary Trust

A discretionary trust is a type of trust in which the trustee has the discretion to decide how the trust's income or assets are distributed among the beneficiaries. This flexibility allows the trustee to consider the personal circumstances of each beneficiary when making distributions.

The concept of a discretionary trust emerged in English law in the 19th century, evolving from traditional trusts where beneficiaries had fixed interests. Its development allowed for more flexible estate planning and wealth management.

In modern law, discretionary trusts are commonly used in estate planning, asset protection, and family wealth management. They enable trustees to adapt distributions based on changing needs of beneficiaries, such as health or financial circumstances.

• A parent establishes a discretionary trust for their children, allowing the trustee to distribute funds based on each child's educational needs.
• An elderly person creates a discretionary trust to provide for a disabled sibling, permitting the trustee to make distributions based on the sibling's care requirements.

• McPhail v. Doulton [1971] AC 424