Discretionary Trust

In a Discretionary Trust, no beneficiaries have defined beneficial interests, which may be attractive for tax and asset protection reasons as well as ensuring great flexibility as the circumstances of the discretionary beneficiaries change in the future.

How the Trustee's discretion is exercised can be periodically influenced by the Settlor or nominee through a Letter of Wishes. A mechanism to protect the Settlor's interests is to have the Trust Deed appoint a Protector, usually a nominee of the Settlor, with the power to serve notice to dismiss the Trustee and appoint a new Trustee.

The Settlor and the Beneficiaries thereby retain indirect power to replace the Trustee if they are not satisfied by the exercise of the Trustee's discretion.