{"id":287091,"date":"2022-04-29T14:01:24","date_gmt":"2022-04-29T19:01:24","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/estate\/trusts\/what-is-the-difference-between-fixed-and-discretionary-trusts.html"},"modified":"2025-07-25T11:06:00","modified_gmt":"2025-07-25T16:06:00","slug":"what-is-the-difference-between-fixed-and-discretionary-trusts","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/estate\/trusts\/what-is-the-difference-between-fixed-and-discretionary-trusts.html","title":{"rendered":"What Is the Difference Between Fixed and Discretionary Trusts?"},"content":{"rendered":"\n
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What Is the Difference Between Fixed and Discretionary Trusts?<\/h1>\n\n
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\n By FindLaw Staff<\/a> | Legally reviewed by Aisha Success, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Fixed and discretionary trusts are two types of legal agreements used in estate planning. A fixed trust specifies beneficiaries and how assets are distributed, offering clear, unchangeable terms that benefit the grantor by ensuring their wishes are followed. In contrast, a discretionary trust does not specify beneficiaries or asset distribution, leaving these decisions to the trustee.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

What Is a Trust?<\/h2>\n

A\u00a0trust<\/a> holds assets for the benefit of beneficiaries. The organization of a trust is straightforward. A family trust is simply any trust vehicle you set up to benefit family members.<\/p>\n

The person who creates it is the grantor (also called the trustor or settlor). The grantor establishes the trust and places assets into the trust. These assets become trust property.<\/p>\n

A trustee controls the trust assets. A trustee ensures they get turned over to the recipients (beneficiaries or heirs) with entitlement to the trust assets.<\/p>\n

Like a\u00a0will<\/a>, a trust is a way to distribute an inheritance. In some ways, a\u00a0trust is more straightforward than a will<\/a>. For example, the grantor legally transfers property to the trust rather than directly to the beneficiaries. This makes legal challenges and conflicts between family members over inheritance less likely.<\/p>\n

With a trust, keeping each person’s inheritance details private is also possible. The beneficiaries do not know what the other heirs received. When the trust owns assets, probate is unnecessary when you transfer all your assets to the trust.<\/p>\n

Tax Implications for Distributions from a Trust<\/h2>\n

Trust funds can also offer\u00a0tax advantages<\/a>. For tax purposes, beneficiaries typically pay for the earnings they get out of the trust, not the entire value of the trust. By distributing wealth over time, you can lower the tax burden for your beneficiaries.<\/p>\n

A beneficiary’s distribution from a trust can come from the trust’s interest income. A trust beneficiary is generally required to pay income taxes on it. But if the trust has already paid the income tax, there’s no extra tax due. A trustee makes distributions from the trust’s principal. When this happens, the IRS assumes that the settlor paid the taxes before placing the principal into the trust. When this is the case, more taxes are not required for the distribution.<\/p>\n

What Is a Fixed Trust?<\/h2>\n

A fixed trust identifies the beneficiary or beneficiaries. A fixed trust details how to distribute assets. The trustee still oversees the distribution, but they cannot change the terms of the trust that you laid out.<\/p>\n

As grantor, you provide directions about:<\/p>\n