Management Specialists

info@oracletrust.com 

 

Trust Arrangement


A trust is an arrangement whereby property (including real, tangible and intangible) is managed by one person (or persons or organizations) for the benefit of another. A trust is created by a settler (owner), who entrusts some or all of their property to people of their choice (the trustee). The trustees hold the legal title of the trust property, but they are obliged to hold the property for the benefit of the beneficiary. The beneficiary is specified by the settler, who holds equitable title.  The trustees owe a duty to the beneficiaries, who are the beneficial owners of the trust property. (The settler and beneficiary can be the same person).


The trust is governed by the terms of the trust document, which is written and set out in a deed form. It is also governed by the local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust deed and the governing law.


We offer different kinds of Trust arrangements and below is a brief description to help you decide which type suits your requirements. If you wish to discuss any of these further with one of our team, please contact us and we will be more than happy to assist you.


  1. Express Trust   

  2. Hybrid Trust

  3. Protective Trust (Click Here to view a sample)

  4. Incentive Trust

  5. Irrevocable Trust

  6. Private and Public Trust

  7. Revocable Trust

  8. Simple Trust


Express Trust

Where property is passed from an owner to a person, but no gift is made by the owner to that person, it is therefore held for the owner by the person, and this is the Resulting trust; where property should for some reason of public policy or rule of Equity be held by a person for someone other than the legal owner, this is either the Statutory trust or the Constructive trust; but where legal title to property is held by someone 'on trust', this is the Express trust.

Hybrid Trust

Hybrid trusts take the best features of a discretionary trust as explained above and the best features of a unit trust and blend them into one entity to create a flexible and powerful tax planning solution.This hybrid discretionary trust has all the features of a discretionary trust, but has the additional ability to issue units. The units shall be known as Special Units, Special Income Units, Special Capital Units or such other distinctive name as the Trustee determines.

The rights as to income and/or capital of the Trust Fund attaching to the units is determined by the Trustee in its absolute discretion, and are described in the Certificate of Units.

Protective Trust

The Protective Trust is a form of settlement found in England and Wales and several Commonwealth countries. It has marked similarities to asset-protection trusts found in several offshore jurisdictions and US Spendthrift trusts.

In such a trust, assets are ordinarily held to pay an income to the beneficiary. The beneficiary may also have access to capital of the trust with the trustee’s permission. The right to receive income from a trust would ordinarily be an asset in the hands of the beneficiary and could be sold, thwarting the intention of the donor to spread the gift over the recipient's lifetime. Additionally on a bankruptcy, the right to the income would be sold by the beneficiary's trustee in bankruptcy.

To give protection to beneficiaries, a protective trust automatically converts into a discretionary trust, under which the beneficiary has no right to the income, if he or she does anything which breaches a condition specified in the document creating the trust.

The establishment of this discretionary trust is ordinarily exempt from the charge to UK inheritance tax on the establishment of discretionary trusts.

Incentive Trust

An incentive trust operates as a sort of "conditional inheritance" for beneficiaries named in the trust. For example, say an aging investor wants to leave a certain proportion of her wealth to a grandchild, but she also wants to ensure that the inheritance money does not lessen the grandchild's drive to pursue a professional career or a higher education. By leaving the inheritance funds to the grandchild in an incentive trust, the grantor can specify that the funds are to be dispersed only once the grandchild has obtained an undergraduate degree, for example (or any other legally permissible requirements the grantor may wish to set out).


Irrevocable Trust

A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust. This is the opposite of a "revocable trust", which allows the grantor to modify the trust.

The main reason for setting up an irrevocable trust is for estate and tax considerations. The benefit of this type of trust for estate assets is that it removes all incidents of ownership, effectively removing the trust's assets from the grantor's taxable estate. The grantor is also relieved of the tax liability on the income generated by the assets. While the tax rules will vary between jurisdictions, in most cases, the grantor can't receive these benefits if he or she is the trustee of the trust.  

The assets held in the trust can include, but are not limited to, a business, investment assets, cash and life insurance policies.


Private and Public Trust

A private trust has one or more particular individuals as its beneficiary. By contrast, a public trust (also called a charitable trust) has some charitable end as its beneficiary. In order to qualify as a charitable trust, the trust must have as its object certain purposes such as alleviating poverty, providing education, carrying out some religious purpose, etc. The permissible objects are generally set out in legislation, but objects not explicitly set out may also be an object of a charitable trust, by analogy. Charitable trusts are entitled to special treatment under the law of trusts and also the law of taxation.


Revocable Trust

A trust whereby provisions can be altered or canceled dependent on the grantor. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries.

Also referred to as a "revocable living trust". This type of agreement provides flexibility and income to the living grantor; he or she is able to adjust the provisions of the trust and earn income, all the while knowing that the estate will be transferred upon death.


Simple Trust

This term is only used in the USA, but in that jurisdiction has two distinct meanings:

▪In a simple trust the trustee has no active duty beyond conveying the property to the beneficiary at some future time determined by the trust. This is also called a bare trust. All other trusts are special trusts where the trustee has active duties beyond this.

▪A simple trust in Federal income tax law is one in which, under the terms of the trust document, all net income must be distributed on an annual basis.


While the preceeding list is a starting point in finding the one that is most suitable for your purpose, the trust law is an ever expanding field. New types of trusts continue to be created, as the tax authorities continues to expand tax and inheritance tax,  and individuals seek to find new ways to properly transfer their wealth to individuals, charities, etc.

 

Our experts will advise which type of trust will be most suitable for your purpose.