What to Know About Discretionary Lifetime Trusts
A discretionary trust is a type of trust in which distributions are made at the discretion of another person (the trustee). Beneficiaries in this type of trust do not have any control over trust assets and are not able to demand distributions.
These trusts are often used for minor beneficiaries. Here’s a quick overview of what you should know.
Establishing discretionary trusts for minor beneficiaries
Because minors cannot legally manage their property or accounts, any assets left for them in trusts must be managed for them by an adult trustee. If you do not name a trustee in your estate plan, the court may name one for you.
Parents and grandparents will generally choose to terminate a trust created for a minor when the child reaches a certain age, at which time the hope is the child will be mature enough to spend, manage and invest the inheritance they receive. Termination of the trust involves distributing the assets that are left to the beneficiary outright at that age.
In a discretionary trust, assets held in the trust are protected from potential claims of creditors and from asset distribution in the divorce process. Distributions from the trust are generally made at certain intervals, or when the child achieves certain milestones, such as ages and accomplishments (like completion of a college education).
For more information about discretionary trusts and how they can be used for minor beneficiaries, contact an experienced Tampa estate planning attorney at BaumannKangas Estate Law.