Legal Considerations When Setting Up a Trust

North Shore trust lawyer

As far as the law is concerned, a trust is relationship where one party is allowed to hold property for the benefit of another. A trust is set by a settlor who transfers all or some of their property to a board of trustees. The trustee holds the property for the benefit of the beneficiary. Trusts have existed for many years and have greatly contributed to property and estate law.

A trust may be set by a settlor, who creates a trust deed which defines the trustees, the settlor, and terms and conditions of the agreement.

What is included in a Trust?

Since a Trust is a legally binding document it is important that it is very clear in its intentions. There are many court cases where people have disputed the trust deed after the death of the Settlor. These cases can be very expensive so you must be clear at the outset.

When setting up a trust, the subject matter must be clearly identified. The trust must state the specific property held under the trust. The property could be real, intangible, tangible or personal. Often people on the North Shore will include real estate, cash, shares or businesses they own.

The trust must clearly identify the beneficiary or beneficiaries of the trust. This saves argument at a later date. The law allows the settlor to include people who are not yet born at the date of forming the trust. This could include future grandchildren.

A trust cold be set up for specific purposes such as a college fund for when a child or grandchild starts their university career.

Similarly, the objective of a trust could be to benefit a charitable organisation. Thus, this type of a trust is for charitable persons rather than specific persons. It is important that the beneficiaries of the charity are not associated in any way with the relatives of the settlor or the trustees.

Trust administration

The trustees become the legal owners of the property and assets held within the trust. Sometimes people forget this and continue to act as if they were still the legal owner. Any decisions taken must be for the best interests of the beneficiaries not the settlor.

A trust could have more than one trustee and in fact it is a good idea to have more than one especially if one of them is a qualified professional such as a lawyer or accountant. (This is a good firm of trust lawyers on the North Shore). The trustees have a fiduciary duty to the beneficiaries and may have other roles to play. The roles include the duty to inform and care for the beneficiary.

Family trust for property

A trustee is under obligation to adhere to the mentioned duties but if he does not want, it can be removed through a legal action.

A trustee could be a person, or a company. The law does not recognise the trust itself as a person and therefore it cannot be sued. However, any litigation against a trust must be filed against the trustees. This is why when constituting a trust, the names of the trustees must be clearly defined. Trustees have rights and responsibilities bestowed on them by the trust instrument or by the jurisdiction. In a case where there are no trustees for a trust, the court may appoint a trustee.

Responsibilities of Trustees

The main job of a trustee is to administer the affairs on behalf of the trust. It may include prudently investigating the assets of the trust, accounting for and reporting to the beneficiary from time to time. They also responsible for filing tax returns, and should perform all other duties the law requires them to perform. This includes maintaining memoranda, meeting agenda and minutes of the Annual General Meeting.

The trustees may depending upon the trust deed make discretionary decisions as to whether the beneficiaries should receive the assets or not. The trustee may be personally liable for the trusts problems and could be fiduciary liable. However, they are able to purchase liability insurance to protect themselves against legal challenges.

Conclusion about setting up a Trust

When creating a trust, the law sets some limitations which must be adhered to. However, the settlor has discretion to do what they wants as long as they operate within the laws.

As the laws and tax requirements of a trust are complex, it is strongly advised that you seek legal advice at the start. A good firm of North Shore trust lawyers is McVeagh Fleming and Co