In terms of this type of trust, the trustees are the actual owners of the trust assets. The rights of the beneficiaries in respect of the trust assets are usually determined in the trust deed.
In discretionary trusts the vesting of benefits or assets in beneficiaries is done at the discretion of the trustees. Sars describes discretionary trusts as trusts where the trustees decide whether to and how much of the income, assets or net trust capital of the trust is to be distributed to the beneficiaries. The beneficiaries only have contingent rights to the income, capital gain, assets or net trust capital of the trust.
It is important to remember that a trust is a contract and that the trustees should take guidance from the trust deed when performing their duties. South African law distinguishes between a general and specific power of appointment afforded to a trustee.
Only a specific power of appointment is accepted or permitted in terms of South African trust law (Braun v Blann & Botha case of 1984). A specific power of appointment refers to the power of choosing or a right of disposal by the trustee.