Briefly explain what a trust is and how it operates?
A trust of property is an obligation on the trustee to hold property or income for a particular purpose on behalf of other people. There are a number of different types of trusts: Discretionary trusts; Unit trusts (public and private); A combination of a unit and discretionary trust (hybrid); Fixed trusts; Testamentary trusts; and Inter vivos trusts. Family trusts are typically discretionary trusts with family members as the beneficiaries. Discretionary trusts are so called because the trustee has a discretion as to which beneficiaries he or she may pay income or capital. Income can usually be paid to one beneficiary at the exclusion of another. The potential pool of discretionary beneficiaries is usually set out in the trust deed. The essential elements of a trust are: A constituent document (the trust deed) although a trust can be created orally or implied; Trust property; Beneficiaries; Trustee; Settlor; and Obligations in relation to the trust property as set out in the trust deed.
