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I am of the opinion that your trust being non-discretionary after your death is central to the concept of a legacy. That is, a source of income for many generations to come. Only the trust deed can make or allow this to happen. It will need to give you specific authority to make that conversion in your Will.

Then, in your Will, you can dictate to all future Trustees that they may not diminish the trust assets and they may only use the trust income in certain ways that you specify.

Is this the best route?

Firstly, we need to ask why the trust is a discretionary trust in the first place. The classic answer is that only a discretionary trust protects its assets from your creditors, but I am not sure that this is strictly correct. Surely, if the trustees are instructed in the trust deed that they may not diminish the trust assets, and that they must prioritise the employment of the trust income in a given manner, then the trust cannot be attacked by the founder’s creditors? A close study of past cases reveals no case in which this has been tested.

However, to be on the safe side, we still follow the path of a discretionary trust during your lifetime. Now, when the founder dies and his/her estate is wound up, there are no creditors left to attack the trust and it can safely become non-discretionary.

My problem here, is that future generations will have to read your Will along with the trust deed in order to gain full knowledge of their powers and obligations, and it may just suit them not to do so.

What are the alternatives?

If you are not concerned about creditors, or are comfortable with my thinking above, you could make your Trust non-discretionary from the beginning, or you could amend an existing trust now. This is the approach that Helen and I have adopted with our trust.

Alternatively, in your Will, instruct the trustees to amend the trust deed to make it non-discretionary and to incorporate your other instructions.

2 comments

  1. Once you’ve created a discretionary trust and trustees are running it, does your will have any authority to direct the actions of the trustees?

    1. Hi Dave,
      No, your Will cannot direct the trustees of a discretionary trust unless the trust deed specifically states that it can. I have never seen a trust deed that allows this except those drafted by us. If you feel strongly about it (as I do), then we can amend your trust deed to rectify this. If we did that, we would, at the same time, examine your trust deed and propose any other improvements that we feel would be appropriate.

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