INTRODUCTION TO TRUSTS

 By Charles Tachiona
Legal Practitioner
Wilmot and Bennett

What is a trust?

A trust is created when its founder “hands over or is bound to hand over the control of an asset which, or the proceeds of which, is to be administered by another (the trustee or administrator) in his capacity as such for the benefit of some person (the beneficiary) other than the trustee or for some impersonal object”

Essential elements of a trust

The essentials of a trust are that the founder intends to create the trust and his intention is expressed in a form which creates a legal obligation to found the trust. The founder must also define the trust assets and the trust objects which must be lawful. An obligation must be placed on the trustee to administer the assets for the benefit of another person or object and he must be independent and have control over the assets of the trust.

Types of trusts

1. Statutory trusts- established in terms of legislation.
2. Testamentary trusts are those created in a will.
3.  Donation trusts are very common in estate planning and when setting up a charitable institution.
4. Educational trusts are frequently used to establish a school or to provide scholarships or bursaries.
5. Debenture trusts are established for the protection of debenture holders where a number of people lend money to a company and there is a need to control strictly the rights of the lenders or debenture holders.
6. Unit trusts are undertakings in which the funds of a large number of investors are pooled and invested in a diverse range of investments by the managers of the unit trust.

Parties to a trust

The parties to a trust are the founder or donor, the trustee and the beneficiary.

Variation of a trust

A trust may be varied by the agreement of the founder, trustee and beneficiaries. It may also be varied by the founder and the trustee before acceptance by the beneficiaries of the benefit of the trust. In limited circumstances the court may vary a trust. Such circumstances include necessity, frustration of the trust objects and the need to sell property.

Termination of a trust

A trust terminates on fulfilment of the conditions prescribed in the trust deed. For example, a testamentary trust might provide that the trust will terminate on a minor beneficiary attaining the age of 21 years. A trust may also terminate if the beneficiary waives his right to receive the benefit or on the destruction of the trust assets.

Advantages of a Trust

Trusts can help you manage your property and assets, make sure they are distributed after your death according to your wishes, and save your family money, time and paperwork. Assets held in a trust are usually protected from creditors of the beneficiaries, or the trustees personally, Trusts also give protection against relationship property claims, e.g, property