When you set up a trust, you may decide that you have a goal that you want to accomplish, and you can focus that trust directly on your goal. For example, maybe you know that the cost of college tuition can be prohibitive for many young people and you want to make sure that your heirs get an education. You can set up a trust with funds that are earmarked only for educational costs.
But another option you have is to create a discretionary trust. When you do this, rather than having a specific goal, you just choose a trustee that you know will act on your behalf. They are then authorized to use their own discretion on how the money should be spent.
Addressing future changes
One major benefit of doing it this way is that the trustee can address things that may change in the future. You cannot, of course, because you have no idea what the future holds when you are creating the trust.
For example, imagine that your heir decides to join the military. Not only do they make a career out of it, but the military helps to pay for their school. If you had put the money into an educational trust, they would no longer need it to cover those costs.
With a discretionary trust, it means your trustee could step in and allow them to use the money in different ways. For instance, they may use it to buy a home or to cover some of the costs of starting a family. You certainly would have agreed with these uses, but you just could not have known in advance that they should be addressed in the trust.
It’s important to get everything right when setting up the trust, so be sure you know what steps to taketo get estate plans that fully meet your goals.