What is the difference between a fixed and non fixed trust?

So, what essentially differentiates between the two types of trusts is that, in the fixed trust, there is an inbuilt mechanism of frequent or periodical distribution of income and capital in settled proportions, which already have been determined. In this kind of trust, the entitlements of the beneficiaries are made clear, while the other kinds of trusts have distinctions that affect the level at which the trustee may have discretionary power over the distribution of assets and also the certainty at which the beneficiaries can expect their entitlements. Following is a detailed description of each kind of trust: 

1. Fixed trust: In a fixed trust, the interests of the beneficiaries in the net income and capital of the trust are fixed at the inception. Generally, there shall be no or limited possibility for the trustee to exercise their discretion on the allocation of either income or capital amongst the beneficiaries since such an arrangement shall be spelt out in the trust deed. In a fixed trust, for instance, each of the beneficiaries has a set and fixed percentage of its annual income, or even a certain amount from its disposal, upon its dissolution. The fact that is dealt with here is the predictability over what the beneficiaries should be certain of in their entitlements, thus making the fixed trust perfectly suited for circumstances where an intended result is targeted, regarding asset distribution, just like the family trusts made for the kids and dependants.
2. Non-fixed Trust (Discretionary Trust): On the contrary is the non-fixed trust, usually called the discretionary trust, which puts in the hands of the trustees the power of making a decision on how the trust's income and capital should be shared among the beneficiaries. It will usually list groups of beneficiaries and leave it to the discretion of the trustee to decide which of these beneficiaries are to gain income or capital, and in which proportion. The trustee can change these distributions depending on the circumstances, the needs of the beneficiaries, or their best interests. This is useful in contingents, tax planning, changes in the needs of the beneficiaries, among many others, which is why non-fixed trusts are very popular in estate planning and asset protection strategies.

Summary:

In fact, the basic difference between fixed and non-fixed trusts is the level of discretion given to the trustee. A fixed trust provides a predetermined distribution, ensuring that beneficiaries know exactly what they are entitled to. In contrast, non-fixed trusts allow trustees discretion over distributions of income or capital, offering flexibility to adapt to changing needs and circumstances. Understanding these distinctions is essential for trustees and beneficiaries to align the trust with their financial and family goals. At One Pacific Trust, our vision is to be the leading provider of trust services, guiding clients through these decisions to create tailored solutions that meet their unique requirements.