Trust drafting practices have changed dramatically in recent decades. A range of considerations has led to an increase in the dispositive discretions held by trustees. In some cases, the trustees’ dispositive discretions effectively govern the whole trust structure, leading to what the author calls a ‘massively discretionary trust’. These trusts create a series of legal risks. These include the possibility that the trust property is held on resulting trust from the moment of the trust’s constitution and the possibility that the beneficiaries can collapse the trust and take the trust property. Some drafting techniques may be based on a misunderstanding of the law; some may invite litigation; and the governing legal principles, as understood by some drafters, may be subject to revision and refinement by the courts. This paper will examine some of these possibilities using concrete examples.
Smith, Lionel, Massively Discretionary Trusts (March 14, 2017). Forthcoming in Current Legal Problems.