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Discretionary trust

This type of trust is very flexible in the approach towards the beneficiaries as there will be a class of beneficiaries but no one beneficiary has an absolute right (contrast the case of a Bare Trust above) rather, the trustees retain absolute discretion and can deal with the trust assets as they see fit subject to the powers provided in the trust deed and the powers provided by statute.

This may mean that funds are not provided to an individual beneficiary because there are concerns that the money could be used unwisely. Sometimes one beneficiary may benefit more than another as the trustees can weigh up the needs of all the beneficiaries in the class and act in a way which can suit the circumstances.

Often discretionary trusts will last for a long time, the maximum is 125 years for trusts created after 5 April 2010. The trustees do need to act fairly and therefore it is important that the settlor chooses his or her trustees carefully at the outset and that the trustees are advised of your wishes at the outset. However it should be remembered that the trustees retain the power to make decisions and are only guided by a letter of wishes prepared by the settlor.