Trusts are traditionally irrevocable, which means that the settlor cannot call for a trustee to return assets, unless the Trust expressly states that it is revocable.
Parties in a Trust
- The settlor creates the Trust.
- They appoint the trustees and specify who the original beneficiaries of the Trust are.
- It is the settlor’s assets that are transferred into the Trust.
- The settlor also can stipulate rules that the trustee should follow while managing the Trust
- They assume legal ownership of the property within the Trust.
- They, where possible, follow the settlor’s wishes and guidelines.
- The trustees must act in accordance with the duties and responsibilities set upon them by law. The trustee’s duties and responsibilities include:
- To act prudently in managing the Trust.
- To avoid conflicts of interest between their duties and the beneficiaries of the Trust.
- To act collectively with all other trustees appointed.
- To act impartially between beneficiaries.
- To act within the powers given in the Trust deed and in law.
- To make and review investments on behalf of the Trust.
- To comply with any tax obligations.
- A beneficiary is the person who may benefit from the Trust that has been created.
- A beneficiary’s precise entitlement will depend on the terms of the Trust and may depend on the discretion of the trustees.
- A beneficiary has a right to the trust being properly administered and can enforce this right against the trustee of the trust, should the trustee not comply with their duties and responsibilities.
Key characteristics of a Trust
- There are three parties to a Trust.
- There is a separation of the ownership of an assets within a Trust.
- The trustee holds legal title to the Trust assets.
- The beneficiary has the beneficial ownership of the Trust assets.
- The Trust assets do not form part of the trustee’s own property and are a separate fund.
- The beneficiaries have a right to enforce obligations set out in the Trust against a trustee.
- Trustees have the power and duty to manage, employ and dispose of the assets according to the terms of the Trust and their special duties under law.
The information contained in this update is for general information purposes only and is not legal advice, which will depend on your specific circumstances.