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2 ways to grant power to a trustee

On Behalf of | Oct 17, 2024 | Estate Administration

When a trust is used as part of an estate plan, a trustee is needed to make distributions. This is a separate individual from the beneficiary, who will ultimately receive the money. The trustee is in charge of determining when a payout needs to be made but does not receive that payout themselves.

There are two general ways to do this, both of which can have some advantages, depending on the specific situation and the family’s needs. Trusts are often used to hold financial assets, but some tangible assets can also be put in a trust.

1. A discretionary trust

The first option is to use a discretionary trust, where you are essentially giving the trustee the ability to use their discretion and make their own decisions. Perhaps you do not trust that the beneficiary will make wise choices with the money, but you know the trustee and you’re sure that they will administer those funds in a way that you would approve of – perhaps assisting the beneficiary with college tuition payments or starting a new business.

2. Specific guidelines

The second option is to give the trustee specific guidelines that they have to follow. They do not get to make decisions on their own. They just ensure that those guidelines or rules are being adhered to every time money is taken from the trust. If the trust says that the money has to be used for college costs, the trustee makes sure that it is.

Trusts can be very helpful in an estate plan, providing more control over the assets. But they can also lead to some estate disputes, such as allegations of misappropriation of funds or misconduct by the trustee. Those involved in any part of this process must know what legal options they have.