Who are the parties to a Discretionary Trust?

This article provides general information relating to the parties in a Discretionary Trust.

Settlor

Trustee

Appointor/Principal

Beneficiaries 

 

Settlor

The Settlor is the person who creates a Trust by "settling" a sum of money in the Trust for the benefit of the Beneficiaries. The Settlor may be a friend who will not benefit under the Trust, or the adviser/accountant/solicitor so long as the client does not refund the settled sum to the Settlor (note, even where the settled sum is not explicitly refunded to the adviser/accountant/solicitor, it can be argued that a refund has nonetheless occurred if the professional fees paid by the client include an amount representing this sum). 

Importantly, the Settlor for a Trust:

  • must be an individual (a Company cannot act as Settlor);
  • must be over 18 years old;
  • must be at "arms-length" from the Trust and is not permitted to benefit from the Trust;
  • should not be a party otherwise to the Trust i.e. Trustee, Appointor, Beneficiary nor related/associated to such parties.

Trustee

The Trustee is the legal owner of the Trust property - all of the Trust's transactions are carried out, and assets are owned, in the Trustee's name. The Trustee's overriding duty is to obey the terms of the Trust Deed and to act in the best interest of the Beneficiaries. 

The Trustee for a Trust:

  • may be one or more Individuals (over 18 years of age) or, ideally, a Company (which does not carry on any other business or investment activity)

Note - If you are setting up a corporate Trustee, proper consideration should be had regarding who will be the directors and shareholders of the Company, especially in light of asset protection. 

Appointor/Principal

The Appointor has the power inter alia to remove and appoint the Trustee, therefore giving them the "ultimate control" of the Trust. 

The Appointor for a Trust:

  • may be one or more individuals (must be over 18 years);
    (Appointing a Company as an Appointor requires legal assistance and therefore cannot be selected within the form. To engage with NowInfinity's Legal Referral Providers, click here)
  • may also be one of the Beneficiaries of the Trust;
  • can be the Trustee on the establishment of the Trust, but may not be appointed as Trustee at a later stage (as there may be adverse stamp duty consequences

Beneficiaries 

Discretionary Trusts usually have a wide pool of potential Beneficiaries, including Companies and other Trusts. The Beneficiaries do not have legal ownership over Trust assets, but they have the right to be considered in the Trustee's decision to distribute trust assets.

More about Beneficiaries can be found here: A Quick Guide to "Beneficiaries" 

Further Information

What is a Discretionary Trust (Family Trust)?

Note: If you are not 100% comfortable in setting up a trust or you do not plan to engage your own solicitor then we recommend you add on legal review to your order. 

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