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Does the discretionary trustee enable you to change the allocation of the income /capital earnings as time or the situation changes?

The trustee of a discretionary trust generally has complete discretion each income year when determining which of the objects of the trust (commonly called the "beneficiaries") will benefit from the income of the trust. The Beneficiaries clause of our trust deed is very broad, and includes most if not all members of a family, including great, great, great, great grandchildren (and even further) as well as companies and trusts the beneficiaries are involved with and various charities, to mention a few. Therefore, in one year, the trustee could resolve that each of the children under 18 receive $1,666, Dad receive $20,000, and Mum the remainder. The following year, Dad could receive $50,000, an uncle $10,000, and a related company receive the remainder. The next year, all Dad's living relatives could receive, say, 5% of the trust's income. Provided the trustee meets its duties under the trust arrangement, the distributions are entirely up to him/her/them/it.

Please note that distributions are generally relevant for tax purposes (i.e., they determine who pays tax on the income), and that they do not necessarily depend on cash moving between the relevant parties.

The trustee also generally has equal discretion regarding distributions of capital, whether during the life of the trust or when the trust eventually vests (i.e., when it effectively "winds up" and comes to an end).

Please note that trusts and trust law can be quite complex, and there are many more issues involved than those set out above. In addition, how the trust can be run can very much depend upon the terms of the individual trust deed. Therefore, we recommend that you obtain professional independent advice before ordering and operating a discretionary trust.