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What Information is Required to Establish a Discretionary Trust

Once it has been determined that a discretionary trust should be established, it is important if hesitant regarding the trust set-up, to seek professional advice to ensure all terms are realised.  Below are the basic discretionary trust appointees required for a discretionary trust.

 

A Settlor

The settlor is a person who desires the establishment of the trust and provides the initial

consideration for the trust to be established (eg. usually $10.00).  The settlor cannot be a beneficiary under the trust.  The settlor after execution has no further obligations with the Trust.

A Trustee

It needs to be decided whether a corporate trustee or natural person trustee is to be appointed for the trust.

Corporate trustees are advantageous for managing trust assets as it is easier to distinguish between trust and personal assets. E.g., ‘Bob Down Trust’ is on the title deeds for House 1 whereas ‘Bob Down’ is on the title deed for House 2, so it’s easier to distinguish which entity owns which asset. Accountants can then more easily distinguish the income from the assets.

Natural Person Trustees If a natural person trustee is used, it’s harder to tell the difference between assets of a trust and those owned by the person. If Bob Down is the trustee of a trust and he owns a house, then ‘Bob Down’ is on the title of House 1 (trust asset) and is on the title for House 2 (his personal asset). This could be a precarious position for accounting and financial purposes, because if the trust cannot repay a debt, a debtor might argue that personal assets could be used to satisfy the debts of the trust.

Appointor

The Appointor has the power to appoint additional or replacement trustees of the trust. The Appointor may be a single person or two persons jointly.

Beneficiaries

The deed provides that the following persons are beneficiaries under the trust.

Specific persons, you nominate as beneficiaries under the trust (ie Specified Beneficiaries)

Such other persons including the parents, grandparents, brothers, sisters, spouses, widows, widowers, children, grandchildren, uncles, aunts and cousins of the specified beneficiaries and the spouses, widows, widowers, children and grandchildren of such brothers and sisters, spouses, children, grandchildren, uncles, aunts and cousins. (i.e. General Beneficiaries)

Such persons or companies (whether beneficially or in their capacity as trustee of any trust and whether subject to conditions or not) as the Trustee may appoint with the consent of the Guardian.

Any charity; or any corporation at least one share or other interest in which is beneficially owned or held by any beneficiary.

Related Tags: Discretionary Trust Set up | Allan’s off the Shelf

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