Which statement accurately describes a discretionary trust as presented?

Which statement accurately describes a discretionary trust as presented?

• A. Trustee has complete discretion to decide payments
• B. Trustee has no discretion - Pay according to trust
• C. Beneficiaries can demand distributions at any time
• D. The trust terminates when the settlor dies

Answer: (B)

Discretionary trusts center on the trustee’s power to decide who among the beneficiaries receives distributions, and when and how much. The defining feature is this allocation discretion within the terms of the trust. Saying the trustee has complete discretion to decide payments captures that idea: the timing and recipients are not fixed by the trust instrument but are chosen by the trustee. If there were no discretion and payments had to be made strictly by the trust’s terms, that would describe a fixed, non-discretionary trust. Allowing beneficiaries to demand distributions at any time would undermine the trustee’s control over timing. Likewise, while some trusts may terminate on the settlor’s death, that termination condition isn’t the defining trait of a discretionary trust.

Discretionary trusts center on the trustee’s power to decide who among the beneficiaries receives distributions, and when and how much. The defining feature is this allocation discretion within the terms of the trust. Saying the trustee has complete discretion to decide payments captures that idea: the timing and recipients are not fixed by the trust instrument but are chosen by the trustee.

If there were no discretion and payments had to be made strictly by the trust’s terms, that would describe a fixed, non-discretionary trust. Allowing beneficiaries to demand distributions at any time would undermine the trustee’s control over timing. Likewise, while some trusts may terminate on the settlor’s death, that termination condition isn’t the defining trait of a discretionary trust.