Describe the difference between discretionary and non-discretionary distributions.

Describe the difference between discretionary and non-discretionary distributions.

• A. Non-discretionary distributions are mandatory or due under the instrument; discretionary distributions are at the trustee's discretion.
• B. Discretionary distributions are mandatory; non-discretionary are at trustee's discretion.
• C. Both are mandatory.
• D. Discretionary distributions cannot consider beneficiary needs.

Answer: (A)

The difference hinges on whether a trustee must pay as the trust instrument directs or may choose whether to pay. Non-discretionary distributions are mandatory or due under the instrument; the trustee has no real choice and must make the payments according to the terms, such as a fixed amount at a certain age or under specific conditions. Discretionary distributions, on the other hand, give the trustee broad authority to decide if, when, and how much to distribute, and to whom, within the trust’s rules. This allows the trustee to tailor distributions to changing circumstances and needs of the beneficiaries, while still honoring fiduciary duties and any stated objectives of the trust. Because discretion can be guided by needs, health, education, and maintenance and support standards, the idea that discretionary distributions cannot consider beneficiary needs is incorrect.

The difference hinges on whether a trustee must pay as the trust instrument directs or may choose whether to pay. Non-discretionary distributions are mandatory or due under the instrument; the trustee has no real choice and must make the payments according to the terms, such as a fixed amount at a certain age or under specific conditions. Discretionary distributions, on the other hand, give the trustee broad authority to decide if, when, and how much to distribute, and to whom, within the trust’s rules. This allows the trustee to tailor distributions to changing circumstances and needs of the beneficiaries, while still honoring fiduciary duties and any stated objectives of the trust. Because discretion can be guided by needs, health, education, and maintenance and support standards, the idea that discretionary distributions cannot consider beneficiary needs is incorrect.