The beginning point as to the extent and degree that a beneficiary may compel a distribution is, of course, the intent of the settlor as that intent is captured by the terms of the trust. Restatement (Second) of Trusts § 128 (1959) (“The extent of the interest of the beneficiary of a trust depends upon the manifestation of intention of the settlor …”)
Historically, the manifestation of this intention was generally fitted into two distinct categories; whether the trust was a “support” or “discretionary” trust:
d. Discretionary trusts. By the terms of the trust it may be provided that the trustee shall pay to or apply for a beneficiary only so much of the income and principal or either as the trustee in his discretion shall see fit to pay or apply. In such a case it depends upon the manifestation of intention of the settlor to what extent the trustee has discretion to refuse to make such payment or application. If the settlor manifests an intention that the discretion of the trustee shall be uncontrolled, the beneficiary cannot compel the trustee to make any payment to him or application for his benefit, if the trustee does not act dishonestly or arbitrarily or from an improper motive. See § 187.
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e. Trust for support. By the terms of the trust it may be provided that the trustee shall pay or apply only so much of the income and principal or either as is necessary for the education or support of a beneficiary. In such a case the beneficiary cannot compel the trustee to pay to him or to apply for his benefit more than the trustee in the exercise of a sound discretion deems necessary for his education or support.
In practice, the two categories are not separate and distinct, but matters of the degree of latitude that a Court will give to the trustee in his or her exercise, or non-exercise, of discretion:
 Restatement (Second) of Trusts § 128 (1959).
A discretionary trust is one in which the settlor gives the trustee authority over the trust, for example, to use discretion in the timing and amount of income payments to the beneficiary. A settlor may provide that the trustee have “sole, absolute and uncontrolled” discretion whether to pay or apply trust income or principal to or for the benefit of the beneficiary. The settlor may also give less latitude to the trustee’s discretion, for example, describing it as “sound discretion,” or “as the trustee deems appropriate,” or simply, “the trustee’s discretion.” If the settlor does not impose any standards or guides that the trustee is to consider, these trusts are sometimes called pure discretionary trusts. However, it has become more common for the settlor to limit the trustee’s discretion by a standard, for example, for the trustee to exercise discretion for the support and education of the beneficiary. These are also now considered discretionary trusts. These descriptions of the trustee’s discretion and the standards for application of discretion are useful to determine the beneficiary’s interest in the trust; however, there is little uniformity between, or even within, jurisdictions.
Even with a pure discretionary trust in which the trustee’s discretion is “sole and absolute,” or “uncontrolled,” and the trust is without standards, the beneficiary may obtain judicial review to determine whether the trustee has abused that discretion. If there were no judicial review, and the terms were taken literally, the trustee would, in effect, be the owner of the trust property and the settlor’s trust terms would be precatory only.
The difference in the court’s review of a trustee’s discretion is a matter of degree; the courts have permitted a continuum of discretion. The court will review a trustee’s more extensive discretion to determine whether the trustee acted or failed to act in good faith and with proper motive. For example, a beneficiary may question the trustee’s good faith where the trustee made trivial or no income payments to the beneficiary in more than one year, or made payments to some beneficiaries but not to others who are in similar circumstances. Some courts determine whether the trustee acted arbitrarily and capriciously.
The Restatement (Second) of Trusts § 187 position was that the trustee must act “in a state of mind contemplated by the settlor,” and this position is repeated in the Restatement (Third). For example, under a direction for the trustee to pay income for the settlor’s spouse’s “comfortable support and maintenance,” a court will review the trustee’s very parsimonious payments to the surviving spouse as an abuse of discretion for failing to follow the settlor’s guidance and ignoring the settlor’s state of mind.
At the other end of the continuum, where the trustee’s discretion is least extensive, courts may give the trustee less latitude and review for reasonableness. A court will not set aside a trustee’s reasonable exercise of discretion. Thus, if one term of a trust provides for the trustee, “in his sole and absolute discretion,” to make payments of principal to the beneficiary where the trustee determines that the beneficiary is capable of wisely investing the funds, but also another term provides that the trustee “in his discretion,” make payments of principal to the beneficiary for emergencies in the beneficiary’s health, a court, reviewing for the trustee’s abuse of discretion, should defer more to the trustee’s decision whether the beneficiary is capable of investing wisely than it defers to the trustee’s decision not to make payments where the beneficiary claims a health care emergency.
In fact, however, courts do not always distinguish these terms in their review of the trustee’s abuse of discretion. Courts will always require the trustee to act in good faith and to accomplish the trust’s purposes. They also often require the trustee to act reasonably. One court, for example, interpreting trust language that ranged from “discretion” over income payments, “sole discretion” over principal payments, and “sole discretion” that was “absolute and binding,” said that it would not interfere with trustees who acted “in good faith from proper motives, and within the bounds of reasonable judgment.”
When a settlor creates a discretionary trust that imposes standards for the beneficiary’s support or for support, maintenance, and education, these trusts are now often called discretionary support trusts. The courts have had difficulty determining how to enforce the beneficiary’s interest in these trusts. Because of the support standard, the trustee’s discretion is more restricted than it would be under a pure discretionary trust, but the trustee has more discretion than in a pure support trust. Trust terms for support have been interpreted to mean that the trustee is to be guided by the beneficiary’s accustomed standard of living, or “station in life,” and usually also includes support for the beneficiary’s household. Discretionary support trusts are also treated in § 229, post.
The Restatement (Third) of Trusts and the Uniform Trust Code now eliminate the distinction between discretionary and support trusts, treating the latter as a discretionary trust with a standard.