Monday, August 30, 2010

Family Trust: Discretionary vs. Non-Discretionary

A family trust can be either discretionary or non-discretionary. A discretionary trust gives the trustee full discretion to allocate income and capital among beneficiaries.

In a non-discretionary trust, the trust deed sets out the parameters within which income and capital are allocated. For example, if a trust has three beneficiaries, each beneficiary could be entitled to one-third of the income on an annual basis, and
one-third of the trust capital when capital allocations are made.

Most trusts are irrevocable, as the tax rules deem any income or capital gains earned by a revocable trust to be those of the contributor and taxed in his or her hands, and not income or capital gains of the trust.

As previouly explained, Trusts can be an effective part of your tax and estate planning. This posting is a brief summary of some features of trusts and is not a thorough examination. Always contact your lawyer and/or accountant for more information.

2 comments:

Unknown said...

Thanks for sharing this post I also share with you some tip hope you like. You can place cash, stock, real estate or other valuable assets in your trust. You meet with an attorney and decide on the beneficiaries and set stipulations. Maybe you say that the beneficiaries receive a monthly payment, can only use the funds for education expenses, expenses due to an injury or disability, or the purchase of a first home. It's your money so you get to decide.
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Unknown said...

Thanks for share this post I also share with you something hope you like my post. With a will, there is a period of time after you pass where all your assets are frozen until a judge can verify the validity of the will. This is what we know as probate. Most often, the key reason for establishing a trust is to avoid a probate which saves all parties time, money and paperwork. Thanks
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