When setting up a trust, one of the biggest decisions you’ll make is this:
Should you fix who gets what—and when? Or should you give your trustee the power to decide?

That’s the fundamental difference between a fixed trust and a discretionary trust.
And making the wrong choice could either tie your hands too tightly… or leave your wealth open to risk.

Let’s break it down.

🧱 What is a Fixed Trust?

In a fixed trust, everything is predetermined:

• Who the beneficiaries are

• What portion of the trust each beneficiary receives

• When they receive it

This offers certainty and simplicity—which can be useful in straightforward family situations. It also avoids giving too much power to the trustee, which may be comforting for some settlors.

🔒 Pros:

• Clear expectations for beneficiaries

• Transparent distribution rules

• Easier accounting and administration

⚠️ Cons:

• Inflexible: Cannot adapt to changes in family circumstances

• Exposed: Beneficiaries' entitlements can be claimed by creditors or ex-spouses

• Tax inefficiency: Distributions may not align with beneficiaries’ income brackets

🌿 What is a Discretionary Trust?

In a discretionary trust, the trustee has the power to decide:

• Who receives income or capital

• When they receive it

• How much they receive

You can still guide the trustee through a letter of wishes, but ultimately, distributions are made at their discretion.

🌟 Pros:

• Maximum flexibility for changing needs

• Stronger protection from legal claims (creditors, divorces, etc.)

• Better tax planning opportunities across beneficiaries

🚧 Cons:

• Requires a highly competent and trustworthy trustee

• Beneficiaries may feel uncertain or resentful

• Risk of disputes if decisions aren’t well communicated

🧠 Real-Life Scenarios

• Fixed Trust Example: You want each of your three children to receive exactly RM500,000 when they turn 30. You don’t foresee any conflict or risk, and you want to keep things simple.

• Discretionary Trust Example: One of your children has a history of addiction or bankruptcy. Another may go through a divorce. You want your trustee to have flexibility to delay or adjust distributions to protect your legacy.

📊 Which One Is Right for You?

🧭 Final Thought

The best trust isn’t the one that’s rigid or overly generous—it’s the one that aligns with your values, your family, and your vision for the future.

Whether fixed or discretionary, the right structure can give you peace of mind today, and shield your legacy tomorrow.

Coming up next:
“Business Succession Planning with Trusts”
Find out how entrepreneurs can use trusts to ensure smooth transitions and avoid costly family conflicts.