A Trust is an arrangement whereby a person gives assets to be managed by another for the benefit of the beneficiaries of the Trust. This arrangement creates a relationship which is known as a Trust. A Family Trust is the term often used to describe a Trust where some or all of the beneficiaries are members of a family.
The settlor is the person who settles, or in other words, establishes or creates the Trust by transferring property to the Trust through giving possession to the trustees, expressing the intention that the trustees hold legal title to the property for the benefit of the beneficiaries.
The property transferred to the trustees is a gift for the benefit of the beneficiaries and should be made voluntarily with no expectation of reimbursement or return. Often, non-income-producing property with nominal value, such as a gold or silver coin or a $100 bill, is used to settle the Trust.
The trustees are the persons who hold and administer the assets of the Trust. They must do so according to the wishes of the settlor. The wishes of the settlor for the Trust are shown in the Trust agreement that is signed by the Settlor and the Trustees.
The beneficiaries are the persons who will receive the assets and or income from the Trust.
By law there are three certainties in the formation of a Trust:
- Certainty of Object – The objectives of the Trust must be known. For example to hold property for the benefit of certain identifiable individuals.
- Certainty of Subject matter – The Settlor must convey identifiable property to the trustees.
- Certainty of Intention – The Settlor must have a clear intention to convey the property and to set up a Trust.
The settlor will have no further role in connection with the Trust or the Trust property after the Trust has been settled and the Trust agreement has been signed.
You may wish to consult your legal advisor with regard to any questions you may have regarding your responsibility as a Settlor of a Trust.