Open v Closed Class Discretionary Trusts There are many different ‘types’ of Discretionary Trusts. Here I will discuss 2 common varieties. Open Class Discretionary Trusts An open class of beneficiaries allows for the beneficiaries of the trust to change over time without the deed being changed. The beneficiaries may be defined as: The Primary and Secondary beneficiaries of the trust with, The Primary Beneficiary being X and, the Secondary Beneficiaries being - The children of X - The spouse of X - The grandchildren of X X may currently not have children, but when children are born they will automatically become beneficiaries without the need to be named. X may not have a spouse, but if X does get married (or de facto depending on the wording) the new spouse will be a beneficiary automatically. If he later remarries then the next spouse will be a beneficiary as well. This is what is called an ‘open class’ of Beneficiary. Closed Class Discretionary Trusts A closed class is restrictive.The Beneficiaries may be named such as The beneficiaries are the following people: Tom, Dick and Harry and Harry’s wife Thelma. If Harry were to remarry a man called Bruce, this would not change things. There are still just 4 beneficiaries. If Thelma were to have children, they would not be beneficiaries. This greatly restricts the range of beneficiaries as the class is limited and it gets smaller and smaller as people die. From an asset protection perspective there is much greater asset protection for the beneficiaries of an open class trust. They have no interest in the trust other than a right to have the trust properly administered. On the other hand the beneficiaries of a closed class trust have something approaching an ‘interest’ in the assets of the trust. The beneficiaries of the trust can collectively demand distribution of the trust’s assets.