What are Trusts
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.
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)
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.
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.
The legal title of the property transfers to trustees upon the declaration of a trust and transfer of property.
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.
A settlor can also be a trustee of a trust
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
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