Trusts

“A trust comes about when a person, the trustee, holds as owner or has vested in him property under an obligation to deal with that property for the benefit of persons, the beneficiaries, whether or not yet ascertained or in existence”

A trust is an obligation created by a settlor either during his lifetime or by his will on his death. The settlor may either create this obligation by deed and by transferring assets to trustees or by intimating his wish to the trustee who would then make a unilateral declaration that he holds such assets settled into the trust by the settlor on trust for beneficiaries. Trust property is deemed to be such property as is settled in trust and all fruits therefrom and any property which represents the original or additional property.

Trust property is held by or in the name of or under the control of the trustee who shall have full power as well as the duty to administer, employ or dispose of the trust property in accordance with the terms of the trust. The essential characteristic of trusts is the distinction between the management of the trust assets, which is vested in the trustees and the beneficial interest of the property which is vested in the beneficiaries. Trust property does not form part of the trustee’s personal estate.

A beneficiary has an entitlement, called a beneficial interest, in or to the trust property. The beneficiary may enjoy the beneficial interest subject to the terms of the trust and the provisions of the law. Any breach of a duty imposed on a trustee at law or any act or neglect on the part of the trustee, which is not authorised or excused at law, or the proper law of the trust or the terms of the trust, is deemed to be a breach of trust. The concepts underlying the administration and interpretation of trust rules have been established over many decades of case law. The integrity of the trust hinges on the independence and discretion of the trustee. In particular if there is excessive involvement of the settlor or beneficiaries in the administration and decision making process of the trust, this may well invalidate the trust.