Trust Structures

A trust is an agreement by which one person holds property for the benefit of another person. The person who agrees to hold the property is usually referred to the Trustee and the person who has the beneficiary interest to the property is called the Beneficiary. The person that decides that such an arrangement is to take place is called the Appointor. This arrangement, along with various matters such as what specific powers the Trustee will have when dealing with the trust assets, and how this arrangement will come to an end, is documented in a legally binding document called the Trust Deed.

Our commercial lawyers can tailor a trust deed to meet your specific requirements and will importantly comply with various laws.

A “Trust” is unable to enter into agreements or purchase assets however the Trustee will do so in its capacity as trustee for the Trust. Our commercial lawyers can assist you in choosing the appropriate person to be appointed as your Trustee.

There are different ways to structure the way a Trustee holds assets and distributes income and capital to its beneficiaries.

Discretionary Trusts (Family Trusts)

If the Trust Deed merely appoints a pool of people that are entitled to distribution but the particulars of distribution is left to the trustee’s discretion, such a trust is referred to as a Discretionary Trust or a non-fixed Trust. The most common type of Discretionary Trust is a Family Trust. A Family Trust is usually created to protect the interests of the immediate family.

Unit Trusts

Unit Trusts are trusts whereby the beneficiary interests in the trust property are divided into units, and the benefit is distributed in accordance with the number of units held by each unit holder. This is a fixed trust. Read more on Unit Trusts.

Fixed Trusts

If the manner of distribution is set, such a trust is usually called a fixed trust. For example, two business partners may operate a business through a trust and agree that John will always receive 60% of the profit and Mark 40%.

Testamentary Trusts

A Testamentary Trust is a trust that is created by a Will and does not come into effect until the testator’s death. For example, if the testator does not wish his child to have access to the Estate until she is 25 years old, the Estate will be held by the Trustee in trust until such time.

Hybrid Trusts

Hybrid Trusts refer to those trusts which combine the aspects of both a discretionary and fixed trusts. How these trusts work will depend on each trust deed.

If you require assistance with trustees including advice on drafting, amending or understanding the terms of the trust deed please get in touch at your nearest Prime Lawyers’ office.