Discretionary Trust Capital Reserved Lineal Descendant

 

A discretionary trust is a type of trust where no person has a definitive right to income or capital, but rather only have a right to be considered by the trustee. A discretionary trust is arguably the most common type of trust, often referred to as a family trust. The trustee has a wide discretion to determine which of the beneficiaries are to receive the capital and income of the trust and how much each beneficiary is to receive. 

The difference between a standard discretionary trust and discretionary trust (capital reserved lineal descendant) is the distribution of capital to Secondary Beneficiaries. With this restricted type of discretionary trust, the trust terms only permit discretionary distributions of income (i.e. not capital) to Secondary Beneficiaries – spouses are excluded from any capital distributions. A spouse may be named on establishment of the trust as a Primary Beneficiary, and if this approach is adopted, there will be no restrictions on capital distributions to that beneficiary.

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