Understanding Different Types of Trusts: Discretionary, Express, and More
Understanding Different Types of Trusts
What is a Discretionary Trust?
A discretionary trust allows the trustee to distribute income and principal among beneficiaries or control disbursements to a single beneficiary as they see fit. The settlor delegates discretion to the trustee to decide when and how much income or property is distributed.
What is an Express Private Trust?
An express private trust is created by the settlor during their life or by will for the benefit of specified persons. It can be created in writing, by deed, by will, or orally in some cases. Essential elements include certainty of intention, subject matter, and objects.
Executed and Executory Trusts
BLACK’S LAW
Executed trust: A trust where estates and interests are completely defined by the instrument, requiring no further actions.
Executory trust: A trust where the instrument is provisional, requiring further conveyances to carry out the terms.
Termination of Trusts
Private trusts have time limits, often based on the lifetime of a beneficiary plus twenty-one years. Trusts usually terminate when the principal is distributed as stated in the agreement.
Charitable Trusts
Charitable trusts support charitable purposes, often making annual gifts to causes, reducing estate taxes.
What is a Constructive Trust?
A constructive trust is an equitable remedy imposed by a court against someone who obtained property by wrongdoing, preventing unjust enrichment.
What is a Secret Trust?
A secret trust is an instrument, usually a will, that appears to give an absolute gift, but the donee has orally agreed to use the property for a third party. Courts enforce this to prevent unjust enrichment.
When Can Trusts Be Varied?
By the terms of the trust instrument: The trust may grant the trustee the power to vary the terms.
By consent: If all beneficiaries are of full age and capacity, they can authorize changes.
By court’s inherent jurisdiction: Courts may vary terms when beneficiary consent cannot be obtained, usually for administration and management.
By statutory provision: Under the Variation of Trust Act (1958), for beneficiaries under incapacity.