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A Trust is a legal entity where there is a Trustee who holds assets legally in their own name on behalf of others (beneficiaries). The Trustee manages the Trust Fund for the benefit of the beneficiaries, who are the recipients of the income and capital of the trust.
In a Discretionary Trust (also called a non-fixed trust) the Trustee has a discretion as to which of the beneficiaries receives the Trust Fund’s income or capital, and to what extent. The beneficiaries do not have a fixed entitlement or interest in the Trust Fund as they do in a unit or fixed trust. The rights of beneficiaries in a Discretionary Trust are limited to a right to be considered for nomination by the Trustee and to compel proper administration of the trust only.
A Discretionary Trust is established by way of a Trust Deed entered into between the Settlor and the Trustee. The Trust Deed regulates the manner in which the Trustee can exercise its discretion. The Trust Deed provided by this service is drafted by our lawyers who practice extensively in this field. It provides the Trustee with a broad discretion regarding the classification of income and capital into different classes, as well as containing a broad definition of beneficiaries to allow greater flexibility in tax planning and asset protection
There are a variety of reasons why people establish Discretionary Trusts. Contact a Legalmart® Lawyers to find out the benefits of setting up a discretionary trust.
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