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Discretionary Trusts

Discretionary Trusts. Basic Idea. Trustee has discretion regarding: which beneficiaries to pay, and/or how much to pay. May (or may not) be subject to a stated standard. Also called “spray” or “sprinkle” trusts. Interest of Beneficiary.

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Discretionary Trusts

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  1. Discretionary Trusts

  2. Basic Idea • Trustee has discretion regarding: • which beneficiaries to pay, and/or • how much to pay. • May (or may not) be subject to a stated standard. • Also called “spray” or “sprinkle” trusts.

  3. Interest of Beneficiary • No interest in income or principal until the trustee exercises discretion. • In effect, beneficiary hopes to receive property under a power of appointment the settlor placed into the trust.

  4. Availability of interest to creditors • General rule = not reachable until paid • Exceptions: • Settlor and beneficiary same person • Child support under Family Code § 154.005

  5. What does “discretion” mean? • Trust Code § 113.029(a). • Dillard – p. 92

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