Trust

A formally arranged fiduciary relationship, developed and enforceable in equity, for the holding and management of property by one party for the benefit of another or for some specific purpose. The essence of the trust is the splitting of ownership into a legal and an equitable component. Thus, in an express private trust, the trustee has legal title to the property he or she is bound to safeguard or actively to exploit on behalf of another, or others, who have the equitable or beneficial ownership of the property.

The parties to trust include the settlor (the person/s who discharges their assets, thereby creating the trust, and then has no further role to play), the trustee (the person/s who manages and controls the trust content) and the beneficiary (the person/s for whom the trust content is being held for).

There are many different types of trust. A trust may be express (explicitly created), implied by the law to exist (resulting) or imposed by the court as a remedy (constructive trust). The most common form of trust is an express trust – this can be divided into two further sub-categories.

• Discretionary trust: a trust in which the trustee maintains some discretion as to how, when, and why the trust assets are distributed.
• Fixed trust: a trust in which the trustee has no discretion as to whom he will distribute the trust assets or the amount he will distribute to each beneficiary.

Additional reading:

The Complete Guide to Trading Trusts for small and medium-sized business