What is a discretionary trust?

A discretionary trust is a trust which leaves some amount of discretion with the trustee as to how the beneficiary receives his or her benefits of the trust. For example, a discretionary trust for a cash account may say the trustee should make payments to the beneficiary as necessary to fulfill the beneficiary’s financial needs. With such a trust, it would be up to the trustee’s discretion as to how much money should be given to the beneficiary to meet his or her financial needs. The amount of discretion in a discretionary trust may be very narrow, extremely broad, or anywhere between the two.

This is opposed to a mandatory trust, which leaves no amount of discretion to the trustee.