Trusts have their origins in English Law, and were originally used to
protect the assets of Crusaders to the Holy Land about 900 years ago. By appointing
trustees to manage their property they could face possible death knowing that their
affairs were in safe hands, and that their families and dependants would be properly cared
for. The Order of Knights Hospitallier of St. John of Jerusalem is celebrating its 900th.
anniversary this year, having its origins in nursing those same settlors of those first
trusts on the battlefield, and in their hospital in Jerusalem. |
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What is a trust?
 A trust is a legal document under which property,
either financial (i.e. bonds or shares) or tangibles (i.e. land or real estate), is placed
into the custody of a designated person, or people, named trustees, for management on
behalf of the Settlor.
What are the various functions of:
Settlor
The Settlor is the person who settles the property or tangibles into the custody of the
trustee. Strictly, unless there are specific provisions in the trust deed, his legal role
both starts and finishes when he has established the trust. However, a Settlor can become
a beneficiary.
Trustee
The trustee controls the affairs of the trust on behalf of the beneficiaries. The trustee
is guided and regulated by the trust deed. The trustee is the legal owner of the trust
assets, but has no right to consummate or enjoy it.
Beneficiaries
The beneficiaries of a trust have the beneficial enjoyment of the trust assets. i.e.
financial distributions to beneficiaries or the usage of trust property i.e. using a house
which forms part of the trust assets.
Protector
The function of a protector tends to be a passive function. His powers are defined in the
trust deeds. Usually the protector does not involve himself in the day to day
administration of the trust but can veto decisions taken by the trustees. The protector
has to be informed on all decision taken by trustees. He has the right to access all
information available on the trust affairs.
Deed of Trust
The deed of Trust is the governing legislation of the trust. It
Why is a trust important tax planning tool?
The trust is an immense tax planning tool because it
allows beneficial enjoyment of an asset to be separated from the legal ownership of that
asset. The person who established the trust no longer owns the asset that he has put into
the trust, but, in a way, he retains control over them.
How can this control be described?
It is possible to have a trust deed in which the
Settlor retained actual control, but for tax and other purposes that might not be an
advantage. The way the Settlor can retain control of the asset whilst not loosing any tax
benefits is by establishing a series of rules and regulations which govern how the assets
are to be dealt with. These rules do not have to be rigid rules, because the Settlor can
place the assets on the trustees and then give the trustees control, subject to certain
guidelines, but remaining relatively safe in the knowledge that the trustees are going to
give effect to his wishes.How are trust used?
Trust are the final holding entity. A trust will
separate the direct ownership of the beneficiaries from the assets or companies and
underlying companies which in turn own assets.
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