DISCRETIONARY TRUSTS: PROTECT YOUR BENEFICIARIES FROM POOR DECISIONS AND OUTSIDE ACTORS

Gabriel Katzner - June 20, 2019 - Trust Administration
discretionary trusts

You’d like to leave your assets to your children and other beneficiaries after you’re gone, and you’re inclined to choose the simplest and easiest form of distribution. Unfortunately, without some built-in protections, a simple distribution can make your inheritance vulnerable to creditors, predators, ex-partners, or divorcing spouses, as well as a second estate tax upon the death of your beneficiary.

A discretionary trust for each beneficiary can keep your assets safer as they change hands.

A discretionary trust: What is it, and what are the benefits?

A discretionary trust is an irrevocable trust set up to protect assets from poor decisions or unanticipated actions, including those that can result from the beneficiary’s poor money-management skills. If your beneficiary isn’t careful with money, or the funds may be exposed to creditors, judgments, or divorcing partners, this type of trust can limit the potential depletion or exploitation that might result.

Under the terms of a discretionary trust, limits are placed on the amount of assets that can be distributed to the beneficiary and when these distributions can be made. If you’re the one setting up the trust, these limits, terms, and time frames can be designed to accommodate your wishes.

For example, you may want to provide distributions only for the beneficiary’s health care needs or only after they reach a certain age. You can provide specific distributions of income or principal at any age, and if you choose, you can stipulate that these funds support only healthcare needs or educational expenses.

An additional benefit

Adding discretionary trusts into your estate plan can also reduce estate taxes, which are drawn from the trust as it changes hands. In what’s known as “generation-skipping,” an inheritance can move from your children directly to your grandchildren, and with a discretionary trust in place, the estate taxes involved in this process can be kept to a minimum.

You can also use this type of trust to dictate who will inherit what is left after a given beneficiary dies; this can help you keep assets in the family over the long term. Within the bounds of bankruptcy and creditor protection laws, the options you can apply to your discretionary trust are almost limitless.

How do discretionary trusts fit into your overall estate plan?

You may be creating multiple trusts to control distributions to your heirs, and discretionary trusts can be included in every one of these. Consider adding discretionary terms to:

  • Your Revocable Living Trust
  • Your Irrevocable Life Insurance Trust
  • Your Retirement Plan Trust

What’s next?

You’re not alone if you’re concerned that your beneficiaries (often children or grandchildren) don’t have the skills they need to manage, protect, or invest their inheritance. This is a common issue, and no matter your questions, our team can provide the answers you need. If you’re concerned about the impact of mismanagement, lawsuits, divorces, or anything else, contact our office, and we can help you incorporate discretionary trusts into your estate plan.

You can use the link below to schedule a call with Gabriel Katzner, or just call us at 855.528.9637 to learn more about how best to plan today to protect those most important to you.

Gabriel Katzner

In 2002, Gabriel Katzner, the founding partner of Katzner Law Group received his Juris Doctorate with honors from the Fordham University School of Law. After spending the first 7 years of his legal career
practicing at Cahill Gordon & Reindel LLP, an international law firm based in New York, he went on to found his own firm.

Gabriel Katzner has a track record, along with a vast number of
outstanding public reviews across platforms, of working hard on behalf of individuals who need assistance with comprehensive
estate planning services. Finding a lawyer who is knowledgeable about revocable and irrevocable trust planning, guardianship for minor children, asset protection, trust administration and probate,
as well as Medi-Cal / Medicaid planning is extremely important.

Years of experience: More than 17 years
Location: San Diego, CA



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This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. Furthermore, it has received approval from attorney Gabriel Katzner, an experienced estate planning lawyer with over 17 years of legal expertise.

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