Estate Planning Lawyer Phoenix, AZ
A Discretionary Trust is similar to many other trusts in that it sets up a legal relationship where the Trustee holds assets for the benefit of one or more beneficiaries. However, in a Discretionary Trust, the Trustee is given full discretion to as to when and what funds are distributed to the beneficiaries. The beneficiaries themselves have no right to the funds and as such cannot make a claim or demand funds from the trust at any time. Only the Trustee can allocate and distribute the funds.
HOW TO SET UP A DISCRETIONARY TRUST
Setting up a Discretionary Trust is not that different from setting up any other Trust. Here’s how to set up a Discretionary Trust:
- HIRE AN ATTORNEY
The most important step is to hire an attorney. Cheap “do-it-yourself” templates and online methods of creating a trust do exist, but hiring a professional is the best way to ensure that a complex legal document does exactly what you want it to do.
- INCORPORATE IT INTO ALL YOUR TRUSTS
Discretionary Trusts can stand alone, but they are often included in any Trust that ultimately makes a distribution to beneficiaries. Examples include:
- Revocable Living Trusts
- Irrevocable Life Insurance Trusts
- Retirement Trusts
If you have a Trust that distributes to your heirs, consider incorporating a Discretionary Trust into that distribution pattern.
- CHOOSE THE TRUSTEE
Before you assume that someone will serve as executor, be sure to ask for them first. You may even want to inform them of what the job entails and see if they feel up to the task. If they agree, make sure you notify them on the important details of the Trust, including financial information and the location where the Trust is kept. Many people choose a third-party institution, like a bank, law firm, or professional fiduciary company to serve as the Trustee.
- REVIEW & REVISE TRUST
Before signing anything, make you sure you understand how your Discretionary Trust works. Don’t be afraid to ask your attorney questions and make changes as necessary.
FUND THE TRUST
Once you’ve created the Discretionary Trust, don’t forget to fund it. If the Discretionary Trust is part of a larger Trust, make sure that Trust is funded so there will actually be something to distribute to the beneficiaries when the time comes.
There are many benefits to setting up a Discretionary Trust, ultimately it is up to you to decide what is best for you and your loved ones.