Basic Elements on Trust

Trust can be a useful and valuation tool for tax administration and on disposition of one’s wealth. Trust is in fact a legal arrangement whereby a person (the trustee) owns property in his name but holds and manages it for the benefit of someone else (the beneficiary). A family trust is one formed for the benefit of a family group. Typically, the creation of a trust involves three parties: (a) Settlor (also Grantor or Donor): The party (e.g. the parents) forms the trust and transfers assets to the trust by way of gift or for value. (b) Trustee: One (an individual or a company) controls, administers and manages the trust according to the trust deed. (c) Beneficiaries: They (e.g. the spouse or children) are entitled to all the income and principal of the trust but have no right or claim to any of the trust property until it is distributed or vested as directed by the trustee. Trust is not a separate legal entity and does not need to be registered like a company in law. Though a trust can exist without documentation, in most cases trust is created by agreement (trust deed) between the settlor and the trustee.