Discretionary trust default clause question

Hello, I am dealing with a trust that on the face of it appears to be a discretionary trust. However, the default clause states that subject to the trustees exercising their above discretionary powers under the discretionary trust, the Trustees shall pay the income of the Trust Fund to a specific beneficiary during their life and they shall have an interest in possession in the Trust Fund during their life. Is this still a discretionary trust?

It is difficult to say without seeing the whole document, but it could well be what is often called a “flexible life interest trust”, where X has a right to the income as it arises (hence an IIP), until such time as the trustees change the terms of the trust. In a sense, that is a “discretionary trust”, because of the wide powers of discretion that the trustees have, but until the trustees exercise those powers, the trust could still be an IIP for X. However, you do need to check that “their above discretionary powers” do not include a power to pay away the income which has arisen to someone else or to accumulate it. To be honest, it would be odd for the trust to be drafted that way, but, then again, it may not have been drafted properly - it is always worth checking, rather than making an assumption.

Paul Davidoff
New Quadrant

Thank you very much for this, Paul.

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