Miscellaneous 2005

A Matter of Trusts: Discretionary trusts and the power to distribute capital

Source: Taxation In Australia Journal Article

Published Date: 1 Dec 2005

 
The discretionary trust has traditionally been a source of asset protection for families, in part through restrictive provisions regarding capital distributions. Many older trust deeds either prohibit capital distributions or require that capital distributions only be made by written instrument with the consent of the guardian, supervisor or appointor. This mechanism prevents trustees from making distributions of capital without consultation. In recent times, this aspect of asset protection has been diluted, due mainly to the call for greater flexibility in the operation of trusts. Many trust deeds now provide the trustee with an unfettered discretion to distribute the capital of the trust. It may be that the push for greater flexibility has gone too far, bringing the protection of the assets of the trust into doubt.
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Anita Aarons

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