A trust that gives the trustee discretion to pay out or accumulate income

• A. One-pot trust
• B. Discretionary trust
• C. Income-discretion trust
• D. Sprinkling trust or spray trust or discretionary trust

Answer: (D)

The idea being tested is a trust structure where the trustee has discretion over distributions, including the option to accumulate income. This is the hallmark of a sprinkling (also called spray) trust, which is a form of discretionary trust. In a discretionary trust, the trustee decides which beneficiaries (often a class) receive distributions and how much, and they can also choose to accumulate income rather than distribute it in a given year. That flexibility—deciding who gets what and when, or to hold income back—defines this type of trust.

Because different jurisdictions use different terms, many sources call it a sprinkling or spray trust, and in essence it is the same concept as a discretionary trust. The option that lists sprinkling trust or spray trust or discretionary trust covers these synonymous ways of describing the arrangement, making it the best fit. The other terms describe different concepts or aren’t standard labels for this flexibility.