All trust structures broadly follow the same principles. There are however certain subtle distinctions between the three key trust types:
This is the most commonly used type of trust. Named beneficiaries of class of beneficiaries do not necessarily have a fixed interest or equal interest in trust assets, but enjoy benefit levels at the discretion of the trustees. The trustee has discretion on payments being made from trust income (and sometimes capital), how they are made and to whom. This discretion is of particular benefit when there is a beneficiary unable to take care of his/her own interests – the trustee being able to make distributions according to individual circumstances.
Accumulation and Maintenance
Trust income is used to look after young people while they are minors. Any residue income will accumulate and is added to the trust assets, which will be distributed to the beneficiaries on or before their 25th birthday.
Fixed Interest Trusts
This is trust where the beneficiary has automatic and immediate right to income arising from trust assets. Normally this beneficiary will have no rights to the trust capital that will often pass to a second beneficiary in the future. These trusts are often used to give a widowed spouse a life long income with capital assets passing to offspring on his/her death.
Download our Discretionary Trusts product note HERE