Discretionary Trust

A discretionary trust is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor. Where the discretionary trust is a testamentary trust, it is common for the settlor to leave a letter of wishes for the trustees to guide them as to the settlor's wishes in the exercise of their discretion.
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Noun
1. a trust that gives the trustee discretion to pay the beneficiary as much of the trust income as the trustee believes appropriate
(hypernym) trust

Used in the context of mutual funds. Refers to a mutual fund or unit trust whose management decides on the best way to use the assets without restriction to a specific type of security. Used in the context of trusts. Refers to a personal trust in which the power of decision as to how much income or principal each beneficiary receives lies with the trustee.

A trust in which the settlor has given the trustee full discretion to decide which (and when) members of a group of beneficiaries is to receive either the income or the capital of the trust. - (read more on Discretionary trust)