Who are the parties to a Discretionary Trust?

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

Note: If you are finding it difficult to understand how these concepts apply to your situation we recommend seeking legal advice. 

Settlor

The Settlor is the person who creates a Trust by "settling" a sum of money in the Trust for the Beneficiaries. Often, the Settlor tends to be the accountant. However, to ensure the correct person is selected, refer to the below requirements that must be met. 

A 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
  • cannot, under any circumstances, also be the Trustee, Appointor or a Beneficiary of the Trust, and
  • should not be related or associated in any way to the Trustee, Appointor or Beneficiary.

Trustee

The Trustee is the legal owner of the Trust property, but not the beneficial owner.  The Trustee decides how to manage the Trust assets, pursuant to the terms of the trust deed.

The Trustee's overriding duty is to obey the terms of the Trust Deed and to act in the best interests of the Beneficiaries. 

The Trustee for a Trust:

  • may be one or more individual (must be over 18 years) or a Company

Appointor/Principal

The Appointor may be considered as holding the most power in a Trust as they can remove and appoint the Trustee(s). 

The Appointor for a Trust:

  • may be one or more individual (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 (or 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" )

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