Interest
Discretionary
An expectancy, not property
Attachable
No
A creditor cannot attach it
Draw widely
Yes
Costs nothing, preserves flexibility
Settlor
Can be a beneficiary
Common for US planning
What a discretionary interest is
In a discretionary trust, a beneficiary holds no more than an expectancy. Something may come their way, yet they are in no position to insist on any particular payment. Every such decision rests with the trustee's judgment. This gap between an expectancy and an actual right is what does the work: nothing is fixed, so a creditor has nothing to latch onto.
Why it cannot be attached
What a creditor can reach is property the debtor owns or has a right to be paid. A discretionary interest fits neither description, since the beneficiary neither owns anything nor holds any enforceable claim. Even a court order compelling a beneficiary to surrender the interest goes unsatisfied, because there is nothing there to surrender.
Who to include
Define it widely. Conventionally the class covers the settlor, the spouse, the children, remoter issue, and frequently a charity, together with a power to bring in additional beneficiaries. Keeping the class narrow ties the trustee's hands in ways that may prove unhelpful across the trust's lifetime, and there is no offsetting advantage to doing so.
Can the settlor benefit
Yes, and within US asset protection structures the settlor is typically included as a discretionary beneficiary. Because that interest stays discretionary rather than proprietary, creditors run up against the very same obstacle they would with any other beneficiary.
Adding beneficiaries later
Most trust deeds already grant the trustee or protector a power to bring in beneficiaries by deed. It is worth retaining for the flexibility it gives. So long as that power is present, no formal amendment to the trust deed itself is needed.
See letter of wishes for distribution guidance.
(Review & sourcing)
Written by
Connor Steens
BBus, business development
Reviewed by
John Evans
20+ years, offshore structuring
Last updated
General information
Sourced from
Primary statute
ITA 1984 and trustee practice
01International Trusts Act 1984 — consolidated text.
02Trustee Companies Act 2014 — licensing requirements.
(COMMON QUESTIONS)
Common questions concerning the class of beneficiaries
It is a discretionary interest, an expectancy that the trustee may choose to act on in the beneficiary's favour.
No, because there is nothing fixed for it to attach to.
Wide. Conventionally it lists the settlor, spouse, children and remoter issue, frequently accompanied by a power to add.
Yes. Since the interest stays discretionary, creditors meet the same obstacle they would with any other beneficiary.
No, because each beneficiary's interest is discretionary in its own right.
By means of a power held by the trustee or protector to add by deed, with no formal amendment to the trust deed required.
Because the interest is discretionary, there is no particular asset a court can freeze or order to be handed over.
A common approach, and one that shows the trust was not set up purely for the settlor's benefit.
(MORE ON THE SETUP)
Source material and further reading on the Setup
References
In-depth reference pages on the Setup.
1 min
Cook Islands Trust Beneficiary Class
Who can benefit, why their discretionary interest is not attachable property, and the drafting choices that preserve flexibility.
1 min
Cook Islands Trust Letter Of Wishes
Non-binding guidance to the trustee. Why it must not be binding, what it should say, and how often to update it.
1 min
Cook Islands Trust Registration
What gets filed, what remains private, and why registration triggers the protective provisions rather than deed execution.
1 min
Funding A Cook Islands Trust
Which assets move easily, which need separate work, why staging is faster, and the timing question that decides whether it holds.
1 min
Reserved Powers In A Cook Islands Trust
What you can keep without undermining the structure, what you should not, and the audit question every power must pass.
1 min
The Cook Islands Trust Deed
What must be in the deed, the five provisions that matter under pressure, and what cannot be included.
1 min
The Cook Islands Trust Duress Clause
Authorises the trustee to refuse a repatriation order. What it protects and what it cannot, explained through Anderson.
1 min
The Cook Islands Trust Jones Clause
Names a known creditor and authorises payment. The counterintuitive tool that weakens the fraudulent intent argument.
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