Legal Tip: 4 Levels of Control with Discretionary Trusts Discretionary trusts have 3 or 4 levels of control: 1. The directors of the trustee company 2. The shareholders of the trustee company 3. The Appointor of the trust 4. The Guardian of the trust (in some cases) The control of the director position is important as it is the trustee that controls the day to day running of the trust – deciding what to buy, what to sell, who receives the income of the trust etc. Where the trustee is a company it is the directors who control this. But the directors in turn are controlled by the shareholders of the company. The directors of the company can be hired and fired by the voting powers of the shareholders. Where shares fall into the wrong hands, such as a trustee in bankruptcy, the control of the director position can be lost and therefore the control of the trust can be lost. Going deeper it is the Appointor(s) who can removed and/or put in a new trustee. So even if the shares of a company are lost the control of the trust can be maintained by removing the trustee and putting in a new one controlled by a friendly party. Some discretionary trust deeds have a control over of Appointor(s) powers in some situations. Certain decisions may need the approval of someone else – often known as a ‘Guardian’ (or ‘Protector’ sometimes). One example is where the trustee is being replaced – the Appointor may need the permission of the Guardian for this to happen. Often the guardian is a person that is not a beneficiary of the trust and may be a professional such as the family tax agent or lawyer.