A discretionary trust gives you control over how and when your assets are distributed to beneficiaries. Instead of setting fixed amounts, you appoint a trustee to manage distributions based on your instructions and the beneficiaries’ needs. This structure can protect assets from creditors, lawsuits, and financial mismanagement while allowing flexibility over time. Many families use discretionary trusts to support loved ones with unique financial situations, such as those with disabilities or spending challenges. With the right planning, a discretionary trust can provide long-term security and peace of mind. At OC Wills & Trust Attorneys, we help clients create trusts that align with their goals.
How a Discretionary Trust Works
A discretionary trust allows a trustee to control how and when assets are distributed to beneficiaries. Unlike a fixed trust, which sets specific amounts or schedules, a discretionary trust gives the trustee flexibility to make decisions based on the grantor’s guidance and the beneficiaries’ needs.
The grantor creates the trust and selects a trustee—often a trusted family member, friend, or professional—to oversee asset management and distribution. The trustee follows general instructions but has the authority to adjust distributions based on factors like financial responsibility, health, or personal circumstances.
This structure helps protect assets from irresponsible spending, creditors, and legal claims. It can also support multiple beneficiaries, ensuring that those with greater financial needs receive more assistance.
Benefits of a Discretionary Trust
A discretionary trust offers flexibility and protection, making it a valuable tool for estate planning. By allowing the trustee to manage distributions based on the beneficiaries’ needs, this type of trust helps safeguard assets while providing long-term support.
Key benefits include:
- Asset protection – Since beneficiaries do not have direct control over trust funds, assets are generally shielded from creditors, lawsuits, and divorce settlements.
- Flexibility in distributions – The trustee can adjust distributions based on a beneficiary’s circumstances, ensuring funds are used wisely.
- Support for vulnerable beneficiaries – If a beneficiary struggles with financial responsibility, addiction, or health issues, the trustee can manage distributions to prevent reckless spending.
- Potential tax advantages – A discretionary trust can help reduce estate tax exposure, preserving wealth for future generations.
We structure trusts to reflect our clients’ goals, ensuring their assets are managed and distributed according to their wishes.
Drawbacks to Consider
While a discretionary trust offers flexibility and protection, it also comes with potential challenges. Before setting one up, it’s important to weigh the drawbacks.
Consider the following:
- Limited beneficiary control – Since the trustee makes distribution decisions, beneficiaries may feel frustrated if they disagree with how funds are managed.
- Trustee responsibility – Choosing the wrong trustee can lead to mismanagement, delays, or conflicts. A trustee must be reliable and capable of handling financial decisions.
- Possible tax implications – Depending on the trust’s structure, beneficiaries or the trust itself may face tax liabilities.
How We Can Help You Set Up a Discretionary Trust
At OC Wills & Trust Attorneys, we work closely with clients to create discretionary trusts that reflect their long-term goals and protect their loved ones. Every family has unique financial needs, and a well-structured trust ensures assets are managed responsibly. We guide clients through selecting a trustee, drafting clear instructions, and addressing potential tax considerations. With careful planning, a discretionary trust can provide security, flexibility, and peace of mind for future generations.
Contact Our Experienced Orange County Discretionary Trust Attorneys
A discretionary trust offers flexibility and protection, ensuring your assets are distributed according to your wishes. At OC Wills & Trust Attorneys, we will help you create a trust that supports your loved ones while safeguarding your legacy. Contact us today to discuss your estate planning needs.
With offices in Irvine, Huntington Beach, and Anaheim, OC Wills & Trust Attorneys also serves clients throughout Southern California, including Mission Viejo, Huntington Beach, Costa Mesa, Seal Beach, Long Beach, Fountain Valley, Newport Beach, and the greater Orange County area.
