Trust

TRUSTS

A trust is the relationship that exists between the legal owner of the assets (the trustee) and the equitable owner (the beneficiary). Put simply a trustee holds property for the benefit of the beneficiary.

In a legal context equity is a branch of law that developed alongside the common law in medieval England. Trusts are a product of equity.

There are numerous elements that make up a trust, these are:

• The trustee has the legal interest in the trust property vested in him by the settlor (this represents title to the assets, giving the trustee the right to manage, administer and moreover transfer the assets).
• The beneficiaries have an equitable interest in the property. This represents the right to enjoy the benefit of the assets according to the terms of the trust.
• Unlike a company or a foundation, a trust does not have a legal personality of its own.

important to remember

It is important to remember the following:

• The trustee holds assets separate from his own personal property. They do not form part of the trustees’ estate and are insulated from the trustees’ creditors.
• The settlor transfers legal ownership of the trust property to his trustees. He also identifies the people whom he wishes to benefit (the beneficiaries).
• The trustees are under a legal obligation to the beneficiaries to comply with the terms of the trust. The relationship between the two parties is a fiduciary one and they have to manage the assets for the benefit of the beneficiaries to whom they are accountable.

The implementation of trusts in modern times has been significant. The courts have adapted the basic trust structure and applied it to a wide range of family, financial and commercial situations.

purposes

A few purposes of how trusts can be used are as follows:

• Reduction of tax liability
• Family provision and estate planning
• Preservation of wealth
• Assist a person with a disability
• Property dispute resolution

Trusts can be established in jurisdictions like Hong Kong, Singapore, New Zealand and Belize.