Discretionary Trust vs Fixed Trust

A discretionary trust gives the trustees a power to choose, between the named beneficiaries, who gets what and when. A fixed trust specifies in advance who gets what share. Most New Zealand family trusts are discretionary, because the flexibility is the point. Fixed trusts are more common where beneficiaries' shares are deliberately locked in.

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Reviewed by EstatePlanning.co.nz Editorial Team · Last updated 28 May 2026

Quick answer

A discretionary trust is the standard NZ family-trust pattern — the trust deed lists beneficiaries (often a wide class) and the trustees decide who receives what and when. A fixed trust specifies each beneficiary's share up front. Discretionary trusts are more flexible but require trustees to actively make and document decisions. Fixed trusts are simpler to administer but lack the flexibility most family situations need.

Discretionary Trust vs Fixed Trust — side by side

Discretionary Trust and Fixed Trust compared
Factor	Discretionary	Fixed
How distribution is decided	Trustee discretion within the named class	Specified by the trust deed
Typical use in NZ	Most family trusts	Some testamentary trusts; certain commercial arrangements
Flexibility	High — trustees adapt to circumstances	Low — shares are fixed
Beneficiary certainty	No automatic entitlement; expectations only	Defined entitlement
Tax treatment (IRD)	Beneficiary income vs trustee income decision made annually	Beneficiary entitlement generally fixed
Trusts Act 2019 disclosure	Beneficiary information must be disclosed (presumption can be displaced)	Same disclosure framework applies
Record-keeping burden	High — every distribution decision must be documented	Lower — distributions follow the deed
Risk profile	Greater risk of beneficiary challenge if decisions are not well documented	Less discretion = less to challenge

When a discretionary fits

Most family trusts where flexibility is the goal
Trusts intended to span generations
Where future needs are uncertain (illness, relationship changes, business outcomes)
Where trustees can be relied upon to make and document decisions consistently

When a fixed fits

Testamentary trusts with specific staged distributions to children at set ages
Commercial trusts where each party has a fixed entitlement
Where simplicity of administration outweighs flexibility
Where the settlor wants to remove discretion to avoid future disputes

Need help working out which fits your situation? Use the form to talk to a lawyer, or browse the related guides below.

Discretionary vs Fixed — FAQ

Is a discretionary trust the default in NZ?

For family trusts set up during the settlor's lifetime, yes — the discretionary pattern dominates. The wide named class of beneficiaries plus trustee discretion is what gives the trust the flexibility most family settlors are looking for. Fixed trusts are more often seen in testamentary trusts (created by a will) or in commercial contexts.

Can a discretionary trust be challenged?

Discretionary trusts can be challenged where trustees have not exercised their discretion in good faith, have not considered the interests of beneficiaries they were required to consider, or have not kept the records the Trusts Act 2019 requires. The flexibility cuts both ways: trustees who do not document their decision-making create a much larger surface area for challenge.

How does the Trusts Act 2019 affect discretionary trusts?

The Trusts Act 2019 codified trustee duties and introduced presumptions about disclosure to beneficiaries — including discretionary beneficiaries. Trustees of a discretionary trust must consider whether to give basic trust information to each beneficiary, and document that consideration. The presumption in favour of disclosure can be displaced, but trustees must turn their mind to it; silent inaction is no longer adequate.

Can a trust be partly discretionary and partly fixed?

Yes. Hybrid trusts are common — for example, a trust may give a defined share to one beneficiary on a specified event (a fixed entitlement) while leaving the balance subject to trustee discretion across the wider beneficiary class. The trust deed sets the boundaries.

Which is harder to wind up?

Discretionary trusts are usually harder to wind up cleanly because the final distribution requires a trustee decision across the discretionary class — and any beneficiary who feels short-changed has a basis to object. Fixed trusts wind up by following the entitlements in the deed, with less discretion to argue about. Either way, the Trusts Act 2019 winding-up procedure must be followed.

Discretionary Trust vs Fixed Trust

Quick answer

Discretionary Trust vs Fixed Trust — side by side

When a discretionary fits

When a fixed fits

Related guides

Family Trusts (overview)

Trust Setup (NZ)

Trust Administration

Testamentary Trust

Discretionary vs Fixed — FAQ