In many cases, people who are setting up a trust will do so with a set of written directions and instructions. This creates a very specific way that the money in the trust can be used.
For example, you may be hoping that your heir will go to college, so you set the money aside as an educational trust. The instructions say it can only be used for college tuition. The trustee then gives payments to your heir as long as they fit this purpose.
But not all trusts are made this way. You can also give the trustee discretionary power so that they can decide when your air should get payouts. What are some of the advantages of doing this?
The trust has a wide range
A discretionary trust is sometimes more helpful to your heirs because it has a wider range and can be applied to more situations. It has more flexibility.
For example, maybe your heir doesn’t need to go to college because they’re an entrepreneur and they started their own business right out of high school. If the trust says that they can’t get the money except for college expenses, they’re in a tough spot because they don’t actually have those expenses. But a trustee with discretionary power can react to this situation and allow your heir to use the money for business or other things that you would have supported.
It helps with adjustments
The future is rather unpredictable, and that’s one of the problems with a very strict trust. A discretionary trust is going to be more adjustable and flexible, as noted above, so your estate can react to things that may happen in the future.
One example could be if an heir comes down with a serious disease and needs very expensive medical treatment. There’s no way that you could have predicted this years or even decades in advance, and you can’t change your trust after the fact. But if it’s a discretionary trust, the trustee can simply decide that this is a valuable use of the money and allow the payouts.
You can see how this is certainly better for your family, which was your end goal when you decided to create the estate plan in the first place. Just make sure that you know exactly what legal steps you’ll need to take.