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There's a lot to think about when it comes to managing your discretionary trust fund. You'll want to make sure your assets are protected, but you also want peace of mind that your capital can be distributed fairly. A discretionary trust deed template can be the starting point for creating a document that ensures everyone's on the same page.
Use this guide to find a discretionary trust deed template and learn what to include in your agreement.
A discretionary trust deed is a legal arrangement that sets out the terms of the transfer of assets between an individual (trustee) and any beneficiaries. The trustee can distribute the income and capital of the trust as they want to, but they are required to comply with the specific terms of the trust.
The settlor chooses who will benefit from the funds of a trust. This can either be a named individual or a group of people. The capital remains within the trust until the trustee decides to use their discretionary power to distribute the funds to all the beneficiaries.
Thankfully the Internet makes life easier with an abundance of websites providing legal documents and templates. There are a number of free templates available that you can use to write your discretionary trust deed. Here are a few options:
A discretionary trust is useful in a few different situations. These include as follows:
The discretionary trust deed must address each aspect of the trust between the trustee (or trustees, if more than one) and the beneficiaries, who need to be at least two.
When writing and signing a discretionary trust deed, you must ensure that it includes all the relevant details about the following:
When stating the terms of the trust, the parties can decide what to include in the document. A Letter of Wishes can be excluded from the deed if it's established to manage an asset following the death of the trustee. A Letter of Wishes is a document that sets out guidelines on how you wish your estate to be executed and is not legally binding.
With a discretionary trust deed, you can protect your assets, reduce your capital gains tax and have flexibility in how you distribute your income and capital. The deed is highly effective because it is a signed agreement between the trustees and is executed according to state or territory laws.
Once your discretionary trust is signed, your assets are protected from creditors in the case of bankruptcy or liquidation. It also allows individuals to receive a 50% Capital Gains Tax exemption. Check out our free capital gains tax calculator here.
For a family trust, the deed gives you the flexibility to plan your estate effectively for the family in the event of an unexpected death.
The discretionary trust deed can be signed by different parties, and the trustee can be either an individual or a company. The deed can appoint one or more trustees to manage the assets for a number of beneficiaries, chosen by the parties.
A discretionary family trust is specifically established for a family. An amount of money, the "settled sum", is held in trust in accordance with the deed for the beneficiaries, who are all family members or related to the same family.