Getting to grips with crucial details of trusts


“Pebbles, I was talking to my lawyer the other day as we are in the process of reviewing the Family Trust which was set up a few years back.  I’ve got a copy of the Trust Deed but to be honest, I’m a bit confused about some of the terminology in it.  I know that my lawyer explained it to me a few years ago but my memory isn’t as good as it used to be.”

“Well”, said Pebbles, taking a seat at the dinner table, “you should be familiar with the fundamental concepts.  For example, your Trust Deed will no doubt refer to a Settlor.  As I recall, you set the Trust up by giving money to the Trust.  You will therefore be recorded in the Trust Deed as the Settlor.” 

“Another key role is that of a Trustee.  The assets of the Trust will be held by the Trustees but the Trustees have a duty to administer the assets of the Trust for the benefit of the Trust’s Beneficiaries.  The Trustees are, at law, the owners of the assets of the Trust but they have a legal obligation to deal with the assets in the manner set out in the Trust Deed, as they hold the assets on trust for the Beneficiaries. The Beneficiaries, as the name suggests, are the people that may benefit from the Trust.  The purpose of the Trust is, of course, to benefit the Beneficiaries” , explains Pebbles.

“A Trust may also have an independent trustee.  An independent trustee is a trustee that is not a Beneficiary. In other words, an independent trustee won’t have any beneficial interest in the assets of the Trust.  Having an independent trustee involved with the administration and decision making of the Trust can provide impartiality and will help avoid any suggestion that a Settlor has simply retained ownership of assets, in which case it might be argued by disaffected parties that the Trust is a sham”,  Pebbles continues.

“Thanks Pebbles”, said Freddy.  “I knew you’d be able to help.”

“No problem Dad”, said Pebbles.  “It’s good that you are reviewing the structures that you have in place.  They should be reviewed periodically so that you can be sure that they are still relevant and up to date”, said Pebbles.

 

The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document. 

If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser. 

 

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Jeremy Hucker