Discretionary trusts

A discretionary trust generally provides maximum flexibility. It is the most widely used and often the most effective solution for both the settlor and beneficiaries. The trustee is given wide discretionary powers as to when, to what extent and to which beneficiaries, the income and capital of the trust should be distributed. Such a trust is useful where at the time of creation of the trust, the future needs of beneficiaries cannot be accurately determined and are likely to change over time. The beneficiaries are not regarded as having any direct legal rights over any particular portion of the trust fund but only a right to be considered when the trustee exercises its discretion.

While the beneficiaries of a discretionary trust are not regarded as having any direct legal rights over any particular portion of the trust fund but only a right to be considered when the trustee exercises its discretion, the Cayman Court in Lemos v Coutts [2003] CILR 381 (not reported by LexisNexis®)