nondiscretionary trust
Học thuậtThân thiện
Definition
Noun: A type of investment trust (a collective investment fund) that is legally restricted to purchasing and holding only the specific securities that were listed or identified at the time the trust was originally created and organized. The trustees have no discretionary power to change the portfolio.
Usage
This term is used in the context of finance, investments, and estate planning to describe a rigid, fixed investment vehicle.
Examples
- The nondiscretionary trust was established with a portfolio of ten municipal bonds, which it must hold until maturity.
- Because it is a nondiscretionary trust, the manager cannot sell the original stocks even if market conditions change drastically.
- Investors seeking a predictable, unmanaged portfolio might choose a nondiscretionary trust.
Advanced Usage
- Legal and Fiduciary Context: The "nondiscretionary" aspect is a key legal feature, meaning the trustee's role is purely administrative, not managerial. This can protect trustees from liability for investment performance.
- Contrast with Discretionary Trusts: Often discussed in contrast to a "discretionary trust," where trustees have broad authority to buy and sell assets based on their judgment.
Variants and Related Words
- Fixed Trust: A near-synonymous term sometimes used for a similar type of restrictive investment structure.
- Unit Investment Trust (UIT): A common form of a nondiscretionary trust in the United States, offering a fixed, unmanaged portfolio of securities.
- Discretionary Trust (Antonym): A trust where the trustee has full authority to make investment decisions.
Synonyms
- Fixed-portfolio trust
- Non-managed trust (context-specific)
Notes
This is a specialized compound noun. The core concept is the lack of discretion ("nondiscretionary") granted to the trustee within the specific legal framework of a "trust."
Noun
- an investment trust that can buy only those securities listed when the trust was organized