SIMPLE (Interest in Possession) TRUST

In this trust, a Beneficiary (or Beneficiaries) may receive income from the trust, and the Trustee has no discretion to withhold payment (except to pay expenses of the trust), nor discretion to pay funds to one Beneficiary rather than another.

COMPLEX (Discretionary) TRUST

In this trust, the Trustee has complete discretion to distribute funds as he wishes to various Beneficiaries. The Trustee may also be empowered to accumulate income. Beneficiaries do not have a right to allocations from the trust, only an expectation of receiving same. The Trustee normally will have discretionary control over the distribution of the trust capital and may also have the power to add beneficiaries. This trust is called a Discretionary Trust in the UK, a Complex Trust in the United States of America.

OTHER TRUST STRUCTURES

Accumulation Trust
Trustees are required to accumulate income either for the entire period of the trust or for a specified period of time. Usually instituted for infant children, it may have an overriding power to distribute income.

Protective Trust
Under this trust, the Beneficiary is entitled to receive income from the trust (similar to a Simple Trust) unless he disqualifies himself by an action such as attempting to sell his interest in future income, or an event such as bankruptcy. Such events would automatically bring the Beneficiary’s entitlement under the trust to an end, and the Protective (Simple) Trust would be replaced by a Discretionary Trust.

Trusts for the mentally disabled will normally be Discretionary Trusts, with income or capital directed at the discretion of the Trustee for a mentally disabled Beneficiary.