Firstly, a trust is a relationship where an entity (trustee) holds the legal title to property, for the benefit of the beneficiaries.
The trustee can be one or more individuals and a company and the beneficiaries, can be one or more persons, companies or trusts
The trustee has a fiduciary duty to administer the trust fund, for the benefit of the beneficiaries, in accordance with the trust deed.
A trust normally runs for 80 years, which is the maximum time prescribed by law.
A trust’s term can be reduced, if the trust assets are distributed earlier to the beneficiaries and the trust is either, subsequently terminated or wound up.
A Discretionary Trust gives the trustee discretion to which beneficiary under the trust deed, will benefit from the trust’s income or capital from year to year.
No beneficiary of a discretionary trust has any interest in the trust or its assets, other than to the due administration.
The trustee can determine each year, which beneficiaries receive distributions and to what extent, in the most tax effective manner.
A Family Trust (discretionary) can help protect family assets and enable income and capital to be spread amongst family members.
Unit Trusts are a fixed trust where the trustee holds the assets of the trust, for the benefit of unit holders, in proportion to the number of units held.
Unit trusts are often used as an investment vehicle (managed funds) by third parties.
There may be multiple classes of units, with different rights attached to each class.
Property held in a Unit trust is divided into fixed and quantifiable parts that are called units.
Money or property is distributed to the beneficiaries in fixed proportion to the units that they hold.
Beneficiaries subscribe to these units in a similar way that shareholders subscribe to shares in a company.
Unit trusts are more appropriate if third parties are investing together and can also facilitate the entry and exit of investors, without having to sell off portions of the underlying asset(s).
Unit holders can be individuals or companies or corporate trustees of various family discretionary trusts.
Always seek professional advice about the implications of holding particular assets or deriving income through a particular trust.
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