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A Guide to Discretionary Blockchain Trusts

What exactly is a Discretionary Blockchain Trust? And how do they work? Blockchain Trust Pro explains what you need to know about Discretionary Blockchain Trusts.



A Guide to Discretionary Blockchain Trusts


A Discretionary Blockchain Trust is a unique type of trust that provides the Trustee with the highest level of discretion in managing and distributing trust assets. Unlike other trusts where beneficiaries have specific rights to funds, a Discretionary Blockchain Trust operates differently. So, what exactly is a Discretionary Blockchain Trust? How does it work, and what are the advantages of using one? This guide will answer these common questions and more.


What is a Discretionary Blockchain Trust?


A Discretionary Blockchain Trust is established for the benefit of a beneficiary or beneficiaries, with the Trustee granted full discretion over distributions. The Trustee decides when and how much funds are distributed, leaving beneficiaries without specific rights to the trust funds. Additionally, the assets in the trust are excluded from the beneficiaries’ estates.

In most trust arrangements, specific terms dictate how and when the Trustee should distribute funds to beneficiaries. Discretionary Blockchain Trusts, however, do not follow such rigid terms. The Trustee exercises full discretion in deciding if beneficiaries should receive distributions, how much they should receive, and when.


These trusts are particularly beneficial in scenarios where the trustor believes it is in the best interest of the beneficiaries to have controlled access to funds. For instance, a beneficiary might exhibit irresponsible behavior, have a disability, face mental health challenges, or have financial difficulties such as significant debt. The Trustee can protect both the beneficiary and the assets, deciding when and how much to distribute based on the beneficiary’s circumstances.


Beneficiaries of a Discretionary Blockchain Trust have no legal claims over the trust funds. The Trustee holds complete control and is considered the legal owner of the assets, although they cannot benefit from the trust funds personally.



What is the Purpose of a Discretionary Blockchain Trust?


The primary purpose of a Discretionary Blockchain Trust is to provide maximum protection for the trust assets, ensuring they are used in the best interest of the beneficiaries. By granting the Trustee significant discretion, they can determine the optimal times and amounts for distributions to support the beneficiaries effectively. Here are some scenarios where a Discretionary Blockchain Trust might be used:


Scenario 1: Managing Irresponsible Behavior 


Imagine you have an adult daughter who has struggled with addiction. While she is currently sober, you worry about future relapses. By setting up a Discretionary Blockchain Trust with a trusted individual as the Trustee, you can ensure that your daughter receives financial support when she is stable, but the Trustee can withhold distributions if she relapses, protecting her from potential self-harm.


Scenario 2: Supporting a Disabled Beneficiary 


Consider a son who relies on Social Security Disability Insurance (SSDI). Direct distributions from a traditional trust might disqualify him from these benefits. A Discretionary Blockchain Trust allows the Trustee to provide financial support without affecting his eligibility for SSDI, offering a safety net while preserving his government benefits.


What are the Advantages of a Discretionary Blockchain Trust?


Discretionary Blockchain Trusts offer several advantages:


Flexible Distribution Guidelines: While the Trustee has broad discretion, the trustor can provide general guidelines, such as prioritizing education or healthcare, allowing the Trustee to align distributions with these goals.


Avoiding Difficult Decisions: Establishing a Discretionary Blockchain Trust can simplify the estate planning process by avoiding the need to make specific decisions about asset distribution, especially for large estates.


Probate Avoidance: Trusts, in general, help avoid probate. By transferring ownership of assets to the trust, they are no longer part of the estate, thus shielding them from certain taxes, creditors, and court fees, and ensuring timely distribution to beneficiaries.


Adaptability: Circumstances and needs can change over time. The Trustee’s discretion allows the trust to adapt to these changes, ensuring that the trust continues to benefit the beneficiaries even as situations evolve.



What are the Disadvantages of a Discretionary Blockchain Trust?


While there are significant benefits, there are also potential drawbacks:


Lack of Control: Trustors must relinquish control over the assets once they are in the trust. They can set guidelines, but ultimately, the Trustee has the final say on distributions.


Trustee Discretion: While the Trustee’s discretion is beneficial, it also means that the trustor must have complete confidence in the Trustee’s ability to manage the trust effectively and in the beneficiaries' best interests.

 

Common Questions About Discretionary Blockchain Trusts


Who owns the assets in a Discretionary Blockchain Trust? 


The Trustee holds legal ownership of the assets, while the beneficiaries hold beneficial ownership. The Trustee is legally bound to manage the assets for the beneficiaries' benefit and cannot use them for personal gain.


Who can be a Trustee of a Discretionary Blockchain Trust? 


Anyone can be appointed as a Trustee, including trusted friends, family members, or professional entities. It is crucial to choose someone trustworthy and financially astute.


Can you take money out of a Discretionary Blockchain Trust? 


Only the Trustee can distribute funds from the trust. Beneficiaries cannot withdraw money themselves.


Do you pay inheritance tax on a Discretionary Blockchain Trust? 


Beneficiaries must understand their tax liabilities. Distributions from the trust's principal are not taxed, but income generated by the trust is taxable at the beneficiary's income tax rate.



Create Your Discretionary Blockchain Trust Today


A Discretionary Blockchain Trust can be an excellent addition to your estate plan, offering flexible and protective asset management for your beneficiaries. If you need assistance setting up a Discretionary Blockchain Trust or any other type of trust, the Blockchain International Corporate Registry Authority is here to help. Our platform makes it easy and affordable to set up a comprehensive estate plan online. Start today and ensure your assets are managed and protected for the future.


Get Started


Explore our different estate planning options and find the right solution for you. Contact us for further details and a confidential consultation.





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