Expertise, Trust, Wills, Estates and Enduring Powers of Attorney

Distributions From Discretionary Trusts

August 2011

Modern Discretionary Family Trusts usually provide that the trustees can pay both income and capital to the beneficiaries at their discretion. Trustees then have a discretion as to what each beneficiary will receive and, depending on the terms of the Trust Deed, may have a discretion as to whether to distribute at all. Trustees of Discretionary Trusts do not have to provide reasons for their decisions.

It is important to make distributions in accordance with the terms of the Trust Deed and to document what has been done. This includes recording the necessary trustees’ resolutions and recording the transactions in the Trust accounts. Regular withdrawals from the Trust must also be accounted for correctly. There should be a clear understanding by all trustees as to what is actually being done.

Poor administration and incorrect trustee behaviour can incur his/her tax rates and create unwanted outcomes from a tax point of view. It can also mean the validity of the trust is put at risk.

For further information, please contact Tony Fortune or Katherine McCarthy