Why my trust is non-discretionary
We have formed hundreds of trusts over the years and I pride myself on the care that goes into the drafting of a trust deed. Why, then, is my own family trust non-discretionary, when all of those that we have prepared for clients are discretionary?
To answer that we need to first ask “Why should a trust be discretionary during the founder’s lifetime?”. As I explained in my recent article “Discretionary and non-discretionary trusts“, it is commonly believed that only a discretionary trust protects the trust assets from the founder’s creditors. I take a slightly modified view, but one that has not been tested in court, so we always play safe.
The next question is “Why am I comfortable with a non-discretionary trust?”
- I am a (very) senior citizen who no longer needs to work, so my circumstances are unlikely to change.
- I have no creditors or bank overdrafts.
- My company has no creditors or bank overdraft.
- So there’s no-one to attack the trust assets.
And now the final question “Why have I chosen a non-discretionary trust?”. If you follow my discussions about legacy trusts, you will know that a trust that we draft has a provision that allows the founder to change the trust to non-discretionary in his/her Will and to leave instructions for future trustees. This is fine, but rather than have future trustees referring to both the trust deed and the Will, the latter should instruct them to change the trust deed to incorporate the founders last wishes.
However, because I am comfortable to do so, I have changed my trust deed to non-discretionary already, and have incorporated my wishes in the existing trust.