WHAT IS A FAMILY TRUST?

A trust is a legal arrangement under which a trustee, or trustees, hold assets for the benefit of other people. It is a separate legal entity or body and will be given a name.

DOES A TRUST HAVE TO BE IN WRITING?

In its simplest form – no. But for the purposes of the type of family trust discussed here, yes it certainly does. A simple form of trust would be for instance the bank account in the name of a parent but held for the benefit of a child.

WHAT FORMS A TRUST?

• The Settlor - that is the person who sets up the Trust.
• The Trustees - these are the persons who are to hold the property on the terms of the Trust.
• The Beneficiaries - these will be the persons for whom the Trust is set up and who are to receive the benefits under the Trust.
• There must also be some Assets in the Trust.
• These assets may be in the form of
  • Cash (there is no minimum sum and a Trust can be established with an initial nominal sum of say $10.00)
  • Land and buildings
  • Stocks and shares, etc
• Obligations and Powers of the Trustees.

The Trust Deed will normally contain details of the powers which the trustees may
exercise. These powers will include directions about such things as -

• The way trustees are to invest funds
• The ages at which beneficiaries may receive benefits
• The way in which new trustees are appointed
• Specific directions about any particular asset

JOINT TRUSTS OR MIRROR TRUSTS?

A “Joint Trust” is the term used where two people together (usually husband and wife) make one single Trust.

A “Mirror Trust” is the term used when two people, again usually husband and wife, make individual Trusts at the same time, but in a form which mirrors each other. Thus the husband may make a Trust which is expressed to be for the benefit of his wife and children.

The wife makes a Trust in similar terms but is for the benefit of her husband and children. Whether you should have a Joint Trust or a Mirror Trust is a matter to be discussed with your
advisor.