INTRODUCTION
Innovation in drafting trust deeds has been central to international trust practice resulting in the discretionary trusts being the norm in modern wealth management. In a seminal article, Lionel Smith observes that these trust drafting practices have ‘led to an increase in the dispositive discretions held by trustees’. His analysis deprecates this development where the ‘trustees’ dispositive discretions effectively govern the whole trust structure’ – which he labels ‘massively discretionary trusts’. Smith goes on to detail the various legal risks entailed in massively discretionary trusts which generally arise from the fact that the explicitly identified residuary or default beneficiaries are usually not the persons who will actually benefit under the trust. Specifically, he asserts that the wide dispositive discretions (which includes the discretion to add objects to the class) given to the trustees effectively confer upon them the power to give the trust assets to whomever they wish, but with scant guidance on how that power is to be exercised and for what purpose ….
Man Yip and Tang Hang Wu, Not such massively discretionary trusts: Proper purposes doctrine and protectors as means of control, King’s Law Journal. Published online: 4 March 2024.
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