Trust

What is a Trust?

Generally, trusts are established when the trustor (Party “A”) chooses to hand over the right or title to an asset to a trustee (Part “B”), who will them possess that asset and manage it for the benefit of a beneficiary (Party “C”). In most cases the asset being entrusted to the trustee will become over time their own personal possession (with full ownership rights), although sometimes the trustee remains merely the possessor.

For the most part, trustees are appointed to manage the asset, to distribute its profits or pass them to the beneficiary according to internal settlements decided on during the establishment of the trust.

The manner and methods of the trustees’ management are set forth in the trust contract that may be in the form of a deed of trust, a declaration of trust, or an agreement of trust. The trustee is obligated to act according to agreed conditions. Trusts can be formed through contracts and in some cases in by the behavior of the parties.

People are used to associating the concept of trusts with English common law and its principle of equity, but some claim that it harkens back much farther and is even mentioned in the Talmud.

Different countries have different kinds of trusts; for example, the Isle of Man accepts trust agreements in cases of life insurance, pensions, and in inheritance and others.

Assets given over to a trustee’s care may be tangible or intangible (such as intellectual property). The trust may be for public or private purposes, provide the trustee greater or lesser discretion, and may serve a single beneficiary.

The Advantages of Maintaining Assets Through Trusts

• Trusts may be tailored to suit the needs of an individual, group or family (such as passing assets from generation to the next);
• Trusts allow individuals to concentrate assets in various locations under one management;
• Trusts are an important tool for rentiers and for capital gains purposes in different countries;
• Trusts provide wealth protection – whether commercial, political, economic or family-related;
• Trusts help dictate terms of inheritance in a way that reflects individual desires and not according to local laws or relevant inheritance laws in his/her birthplace;
• Trusts protect confidentiality of information – for example, in many areas deeds of trusts need not be submitted for documentation in public records;
• Trusts are important for planning employee options, benefits, retirement plans, insurance policies and other special financial settlements.

Types of Assets Held in Trusts

Most trusts are established when beneficiaries choose to giver over care of assets to a trustee, and there are no restrictions on the type or quality of asset being entrusted.

• Intellectual property and tangible property
• Investment portfolio
• Bank deposits
• Life insurance policies of beneficiary
• Additional assets

Office holders:

• Settlor - (often called “Grantor”, “Trustor” or “Creator”) – as stated, a settlor is a person who chooses to entrust his asset(s) to a trustee. In some cases the settlor may also serve as the trustee, alternatively he may also be the beneficiary of the trust. 
• Trustee – The person who receives possession of the asset and is appointed to act for its best interests for the benefit of the beneficiary, subject to settlements determined in the deed of trust. A Trustee may be individuals or even a company. The Trustee may be the settlor of the trust or its beneficiary.
• Beneficiary – Any person or legal entity. May be the settlor or self-appointed trustee.
• Protector – There is no requirement to appoint a protector. One may be appointed within the trust to oversee the trustee and limit his authority, or even in certain cases to determine their replacement.