Discretionary Trusts:

• A discretionary trust is a type of trust where the trustees have the discretion to decide how the trust property or income is distributed among a class of beneficiaries. The beneficiaries do not have a fixed entitlement but rather a hope or expectation (spes) that the trustees will exercise their discretion in their favor.
• Key characteristics include: The trustees are given powers of appointment, which can be fiduciary (requiring them to act in the best interests of the beneficiaries) or non-fiduciary. In practice, this allows flexibility in responding to changing circumstances, such as the financial needs or tax situations of beneficiaries.
• Legal implications: Beneficiaries cannot compel the trustees to distribute unless the discretion is exercised improperly (e.g., fraud on a power). Under Ghanaian law, influenced by English common law (e.g., McPhail v Doulton [1971] AC 424), the test for certainty of objects is “is or is not” – can it be said of any person whether they are in the class or not.
• Practical example in Ghanaian banking: In estate planning for high-net-worth clients at banks like Ecobank Ghana, discretionary trusts are used to manage family wealth, allowing trustees (often bank-appointed) to allocate funds for education or business ventures based on merit, ensuring compliance with BoG’s fiduciary standards and avoiding rigid distributions that could lead to disputes or tax inefficiencies.
• Advantages: Protects assets from beneficiaries’ creditors since no vested interest exists; promotes family harmony by adapting to needs.
• Disadvantages: Potential for trustee bias; beneficiaries may feel insecure.

Fixed Trusts:

• A fixed trust, also known as a non-discretionary or interest-in-possession trust, is where the beneficiaries have a fixed, predetermined entitlement to the trust property or income. The trustees have no discretion; they must distribute according to the terms set by the settlor.
• Key characteristics: Interests are vested or contingent but clearly defined, e.g., “income to A for life, remainder to B.” This aligns with the “three certainties” requirement (intention, subject matter, objects) under Knight v Knight (1840) 3 Beav 148.
• Legal implications: Beneficiaries can enforce their rights directly, and the trust is imperative – trustees must act as directed. In Ghana, this is governed by common law principles, with no specific statute overriding unless involving land (e.g., Conveyancing Decree 1973, NRCD 175).
• Practical example in Ghanaian banking: Fixed trusts are common in pension funds managed by institutions like Stanbic Bank Ghana, where employees have fixed entitlements to benefits, ensuring predictability and alignment with BoG’s Pension Funds Regulation under the National Pensions Act, 2008 (Act 766), reducing operational risks from discretionary decisions.
• Advantages: Provides certainty and security for beneficiaries; easier to administer as no judgment calls needed.
• Disadvantages: Lacks flexibility; may not adapt to unforeseen changes, potentially leading to inequities if beneficiaries’ circumstances evolve.

(Marks allocation: 10 marks per sub-part for clear definitions, characteristics, legal implications, and practical examples.)