What are Trusts

Trust

Trust is a relationship in which person A sets up/declares a trust and transfers property to Person B for the benefit of person C.

Important Terms

Person A is referred as Settlor (who sets up or declares a Trust)

Person B is referred as Trustee (he/she holds the trust property)

Person C is referred as Beneficiary (for whose benefit the trust is declared/established)

Property

By property we mean

Real Property (land, buildings, and houses etc)

Personal Property (cars, jewellery, paintings, CD’s, and boats etc)

Any property can be transferred to a trust such as land, building, leasehold property, goods, cars, jewellery, paintings, shares, Bonds, boats, yachts, patents, trademarks, insurance policy, bills of exchange etc.

Example

Simon declared a trust for the benefit of his son Mike and daughter Elisa. He made his best friend Adam a trustee. Simon transferred his house, car, saving and shares into the trust. 

  • Simon is a settlor,
  • Adam is a trustee and
  • Mike and Elisa are beneficiaries.

Legal Title

The legal title of the property transfers to trustees upon the declaration of a trust and transfer of property.

Examples

Simon declares a trust for the benefit of his son Mike and daughter Elisa. He appoints his best friend Adam a trustee. Simon then transfers his house, car, savings and shares into the trust.

Adam is the trustee and he now legally owns the house, car, savings and shares. But he cannot keep or use them as they are for the benefit of Mike and Elisa.

Important

A settlor can also be a trustee of a trust

Example

Simon declares a trust for the benefit of his son Mike and daughter Elisa. He also appoints his self a trustee as well. Simon then transfers his house, car, saving and Shares into the trust. It is a valid trust and as Simon is a trustee as well, the title of the house or ownership of the car does not need to be changed. They are already in Simons name but he has to use them for the benefit of Mike and Elisa only. 

Simon is a settlor

Simon is also a trustee as well

Mike and Elisa are beneficiaries.

Purpose of Trusts

  • To pass on assets when someone is alive or upon the death of their family or friends etc
  • To provide for children or minors who cannot hold property in their own name till they reach the age of 18 or where the beneficiary is not of sound mind and they are incapacitated
  • To make sure that assets passed on are properly used for the intended purpose
  • To protect the beneficiaries from creditors
  • To hide the identity of the real owner of the property
  • To reduce tax liability
  • To provide for a charitable purpose
  • Trust of lands to safeguard the interest of couples both married and unmarried
  • Trusts are commonly employed in all sorts of business situations

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.

Scroll to Top