The Beneficiaries of a Model Offshore Trust are the individuals (and possibly charities) you’ve included in the Beneficiary Class.
The Trustee’s discretion in determining when and how much to distribute to each Beneficiary is essential for protecting them from lawsuit creditors, from tax on the Trust’s earnings and from possible future changes in U.S. laws (such as currency controls or a prohibition of gold ownership).
In exercising its discretion under the Model Terms of Trust, whether in regard to the distribution of benefits or to anything else, the Trustee is legally obligated to act for the purposes contemplated by you, the Grantor. The Trustee must always act for the welfare of the Beneficiaries. Thus the wide grant of discretionary authority does not permit the Trustee to make decisions for its own advantage.
Meaning of Discretion
The degree of the trustee’s discretion is a question that every trust instrument must address. How much authority is given to the trustee to use its best judgment rather than be controlled by inflexible rules?
Discretion in a trustee does not mean the trustee is free to act at its own pleasure or convenience or for its own profit or other benefit. A trustee’s discretion is only the authority to do things for the purposes of the trust, i.e., for the welfare of the beneficiaries. The trustee is legally obligated to use its discretion reasonably, and it may not refrain from exercising its discretion when it would be unreasonable to fail to act.
Thus for a trustee, discretion is duty. And the duty is enforceable by law.
The exercise of discretionary authority by the Trustee of a Model Offshore Trust is monitored by the Trust Protector, who has the power to replace the Trustee if the Trustee’s actions fail to accord with the Grantor’s intentions. That is why in most cases the Grantor wants to retain the role of Protector.
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