How does a probate lawyer help in Fixed and Discretionary Trusts?

How probate lawyer helps in Fixed and Discretionary Trusts?

Understanding Fixed and Discretionary Trusts and the role of a probate lawyer

Trust agreements provide a wide range of advantages to both the settler and the beneficiary. Yet there are numerous kinds of trusts. Let us understand a probate lawyer’s fixed and discretionary trusts. 

Multiple individuals have heard the terms revocable and irrevocable when it comes to discussions about trusts. However, you might not have heard about the terms fixed along with discretionary. Although, these terms are considered vital as they tend to control the flexibility related to probate lawyers when it comes to the distribution of assets.

What is a Fixed Trust?

A fixed trust is created to give money or assets to beneficiaries as per a schedule. A fixed trust is handled by the trustee designated by the person who made the test. This person is also a settler. 

Within a fixed trust, the individual who has created the trust schedules distributions to specific heirs in certain amounts. There’s no control over the probate lawyer over the schedule, charges, or beneficiaries. The role of the trustee is limited to handling the assets within the trust. The trust tends to dictate and distribute per the terms made by the faith. The individual who has created the trust has zero control over when and how the distribution will be made and to whom. 

What is Discretionary Trust?

A Discretionary trust is known to be a trust established for the advantage of one or over one beneficiary. However, the trustee has complete discretion regarding when and how to distribute to the beneficiaries.

A discretionary trust is more common. It gives the trustee the authority and accountability to create the distribution at their discretion. A Discretionary trust tends to provide distribution control to the trustee rather than the individual who made the trust. 

Let us take an example.

Joy and Mary possess a young family. Joy is a healthy person. However, he wants to look after his children when he is not in good health. As his children are young, Joy worries about how they will manage money. Therefore, Joy establishes a Discretionary trust. Consequently, he is secure now as he is aware that the trustee will make sure to fulfill all the desires of his children. To sum up, the Discretionary trust will ensure that the wastage of money does not occur.

Advantages of Fixed Trust 

1. The beneficiaries of the fixed trust have fixed interests within the income and the capital of the trust property. Therefore, they can enforce the administration and distribute the trust property. 

Drawbacks of Discretionary Trust

1. The trustee does not possess discretion on how to disperse the income. 

Advantages of Discretionary Trust 

1. Estate planning takes place to provide an advantage to the family members in case of unexpected death. 

2. Trust property is known to be exempt from creditors. Therefore, a creditor cannot take trust property in bankruptcy or liquidation. 

3. Tax gets mitigated. Individuals receive only a 50% capital gains tax exemption. 

4. The trust income and capital get quickly and flexibly distributed. 

Drawbacks of Discretionary Trust 

1. There’s difficulty in launching as well as maintaining a trust structure. 

2. Only profits get distributed. 

3. Investors tend to invest more in a company structure than a trust structure

Conclusion 

Trust agreements provide a wide range of advantages to both the settler and the beneficiary. Within a fixed trust, the individual who has created the trust schedules distributions to specific heirs in certain amounts. There’s no control of the trustee over the schedule or the charges, or beneficiaries. The role of the trustee is to handle the assets within the trust. Although, a Discretionary trust is more common. It provides the probate lawyer authority and accountability to create the distribution at the trustee’s discretion.

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