A discretionary trust is a type of trust in which the trustees have discretion to distribute the trust property to one or more of the potential beneficiaries, rather than having to distribute it to a specific beneficiary or according to a predetermined formula. The trustees have the authority to decide how much, if any, of the trust property to distribute to each beneficiary, based on their own judgment and the terms of the trust.
Discretionary trusts are often used to provide financial support to a group of people, such as family members, without specifying exactly how the trust property will be distributed. This allows the trustees to respond to the changing needs and circumstances of the beneficiaries over time.
In a discretionary trust, the trustees have a fiduciary duty to act in the best interests of the beneficiaries and to exercise their discretion in a reasonable and impartial manner. The trust property is usually managed by the trustees, who are responsible for investing and distributing the assets in accordance with the terms of the trust.
Discretionary trusts can be complex and have various tax implications, so it is important to seek legal and financial advice when setting up or managing a discretionary trust.