Concept
A "trust" is not a single instrument but a family of structures. The choice of type determines who controls the assets and how, the level of protection they receive, and how they are taxed. Choosing the wrong type means getting the wrong protection and the wrong tax treatment.
🍓 The main axes of choice are discretionary vs. fixed (who decides on distributions) and revocable vs. irrevocable (whether the settlor can take the assets back). Both protection and taxation depend on these choices.
Discretionary and Fixed
In a discretionary trust, the trustee decides which beneficiaries from the designated class receive distributions and how much; no one has a guaranteed share—this provides maximum flexibility and protection. In a fixed trust, shares are predetermined; it is more transparent but more rigid and offers less protection.
Revocable and Irrevocable
A revocable trust can be amended or dissolved by the settlor at any time—convenient, but it offers no protection from creditors and often no tax benefits, since the assets essentially remain the settlor's. An irrevocable trust is a true transfer: it is the type that protects assets and works in estate planning.
Special Types
Life Interest Trust
One beneficiary (for example, a surviving spouse) receives income or the right to use the assets for life, and after their death the assets pass to the next beneficiaries—typically children. A classic solution for blended families and phased intergenerational transfers.
Purpose Trust
A trust not for the benefit of individuals but for a specific purpose—often used as a "holder" of shares in a PTC or family holding company, and also in charitable contexts.
⚙️ The type of trust is chosen based on the objective and the tax residence of the beneficiaries; the same trust is taxed differently in different countries.
How to Choose
🔗 Related
How a Trust Works · Asset Protection Trusts · Trustee and Protector · Trusts and Inheritance Tax
For asset protection and inheritance—irrevocable discretionary; for a surviving spouse—life interest; for holding a structure—purpose trust. The choice is always cross-checked against forced heirship rules and tax implications.
This material is for informational purposes only and does not constitute individual legal advice.