The discretionary trust
There are a number of forms of private or family trust and a variety of permutations or refinements possible as to structuring. The most common, however, is the Irrevocable Discretionary Settlement and the reason for its popularity is the considerable degree of flexibility it offers. We would stress that the word "Irrevocable" does not mean that the structure cannot be terminated or modified.
The basic concept of the discretionary trust is that the Settlor transfers assets to the Trustees and the legal title and ownership of the assets transferred is vested in the Trustees. The Trustees will hold the assets transferred, on behalf of the equitable interests of the desired Beneficiaries of the Trust during the Trust period. A trust instrument is prepared which embodies information including the following:
(i) The name of the Settlor.
(ii) The names of the Beneficiaries (which may also include the Settlor).
(iii) A description of the initial assets settled by the Settlor.
(iv) A statement of the Trusts upon which the assets settled are held.
(v) A definition of the Trust period i.e. the period during which the assets will be held by the Trustee on Trust for the Beneficiaries. (Sometimes a Trust Instrument will nominate a Protector having certain powers over the Trust's provisions, which person can be a trusted person close to the Settlor's family).