Many Canadian families with a moderate degree of wealth create a
family trust. A common type of trust names a parent or an adult
child as a trustee, and names both adult and minor children as
discretionary beneficiaries.
Family trusts can be created for several reasons, including to
reduce taxes payable and to control the beneficiaries' use of
funds and the timing of the distribution of trust assets.
The trustees of a discretionary trust are usually directed to
distribute income and capital from the trust in their
"absolute discretion." The discretion includes the
ability to decide which of the beneficiaries will receive income or
capital from the trust and when a beneficiary receives it. If the
trust is discretionary, the trustees are not required to treat the
beneficiaries equally.
