Non-Discretionary Trust Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Non-Discretionary Trust, written in plain English, along with examples of how it is used.
What is Non-Discretionary Trust?
It is a trust where the trustees invest only in those securities that were mentioned at the time of making the trust ; or invest only in certain specified securities and also they do not have any powers to determine the method of distribution of the trust to beneficiary.
History and Meaning of Non-Discretionary Trust
A non-discretionary trust is a type of trust where the trustees have no discretion over the funds or assets that are held in trust. This means that the trustees have no power to determine how the trust is managed, how the trust's assets are invested, and how the income or property of the trust is distributed to the beneficiaries. Non-discretionary trusts have a long history in trust law, and they are frequently used in estate planning and asset protection.
Examples of Non-Discretionary Trust
A wealthy individual creates a non-discretionary trust for their minor children. The trust specifies that the funds can only be used for the children's education and living expenses until they reach a certain age. The trustee cannot deviate from these instructions.
A company establishes a non-discretionary trust for its employees' retirement benefits. The trust specifies that the funds must be invested in a specific type of low-risk investment to ensure the employees' funds are safe.
A family places their assets in a non-discretionary trust to protect them from creditors. The trust specifies that the funds can only be used for certain purposes, and the trustee cannot make any discretionary decisions without the approval of the beneficiaries.
Legal Terms Similar to Non-Discretionary Trust
Discretionary Trust: A discretionary trust gives the trustees the power to decide how the trust's assets are invested and distributed to the beneficiaries.
Spendthrift Trust: A trust that restricts the beneficiary's access to the trust's assets to protect them from their own spending habits and creditors.
Revocable Trust: A trust that can be altered or revoked by the grantor at any time.