What are "discretionary distributions" in a trust?

Discretionary distributions refer to the distributions made by a trustee based on their judgment and discretion rather than through a fixed requirement outlined in the trust agreement. In a trust arrangement, a trustee is typically granted the authority to determine when, how much, and to whom assets of the trust will be distributed. This allows the trustee to evaluate the needs and circumstances of the beneficiaries before deciding on the distributions.

Such flexibility is crucial in managing the trust for the benefit of the beneficiaries, as it enables the trustee to respond to varying situations that may arise, providing support when it is most needed while also preserving trust assets for future use. In contrast, other types of distributions, such as mandatory payments or fixed amounts, offer no such flexibility and therefore cannot be categorized as discretionary. This capacity for judgement is essential, particularly in trusts where the beneficiaries' financial needs may change over time.