What is a Discretionary Trust?

A discretionary trust gives trustees complete discretion over when and how much to distribute to beneficiaries. This flexibility makes it the most common trust structure for New Zealand families.

Key Features

Trustee Discretion

Trustees have full authority to decide:

  • Which beneficiaries receive distributions
  • When distributions are made
  • How much each beneficiary receives

Flexibility

Adapt to changing family circumstances without amending the trust deed.

Protection

Beneficiaries have no automatic right to trust assets, providing strong creditor protection.

Advantages

  1. Maximum Flexibility - Trustees can respond to beneficiaries’ changing needs
  2. Asset Protection - Strong protection as beneficiaries don’t “own” anything
  3. Tax Planning - Income can be distributed strategically
  4. Family Disputes - Reduces potential for disputes as no beneficiary has guaranteed entitlement

Common Uses

  • Family homes and investments
  • Business assets
  • Succession planning
  • Asset protection for professionals
  • Relationship property protection

Trustee Responsibilities

Under the Trusts Act 2019, trustees must:

  • Know and understand their duties
  • Act in the best interests of beneficiaries
  • Exercise discretion reasonably
  • Keep proper records
  • Provide information to beneficiaries

Is a Discretionary Trust Right for You?

Consider a discretionary trust if you want:

  • Maximum flexibility in distributions
  • Strong asset protection
  • The ability to adapt to changing circumstances
  • Control over how and when wealth passes to the next generation

Setup Process

  1. Initial consultation to understand your needs
  2. Draft custom trust deed
  3. Appoint settlor, trustees, and name beneficiaries
  4. Transfer assets to the trust
  5. Register with IRD
  6. Implement ongoing administration

Contact us to discuss whether a discretionary trust suits your situation.