Discretionary trusts are mutual funds or mutual fund programs that are designed to allow the administrator a fair amount of leeway in managing the resources of that trust. In the case of an investment association, the administrator is not limited to investments in certain types of securities. This approach to a trust arrangement usually takes place when the concessionaire has a high degree of confidence in the ability of the administrator to administer the discretionary trust for the benefit of all concerned.
When it comes to a fund, a discretionary trust usually provides the administrator with general guidelines for managing that trust but leaves the details of managing the trust in the discretionary administrator. For example, a parent established a trust relationship with a minor child may specifically authorize the administrator to disburse funds that will aid in promoting the child’s education. With discretionary confidence, it is up to the curator to decide what constitutes an education offer for the child. From this perspective, the administrator can authorize the release of funds to attend workshops and seminars considered to increase the knowledge base of the child and use the confidence to pay for participation in an accredited college or university.
An estimate of confidence at times allows the administrator to adjust the amount of financial support provided to the recipients over a given period. Under these conditions, the administrator may choose to provide the recipient with an increase in a monthly benefit based on an increase in general living expenses. At the same time, the administrator may choose to reduce the monthly benefit if there is some suspicion that the recipient is not using the service as the concessionaire intends.
A discretionary trust approach is often engaged in establishing a family trust. This makes it possible to concentrate entire family assets in a common pool or resources, which are then paid to family members recognized as beneficiaries. With a family trust, as a rule, the administrator ensures the continued investment of resources in that trust, so that the recipients will have a stable income from that trust for a number of years. Efficiently growing resources in trust also allow the administrator to provide assistance to the recipients when they want to make a big purchase, such as a first home, or pursuing a career that requires more study than a basic four-year education.