HOME

TheInfoList



OR:

A trust instrument (also sometimes called a deed of trust, where executed by way of deed) is an instrument in writing executed by a
settlor In law a settlor is a person who settles property on trust law for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the s ...
used to constitute a
trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust law, a body of law under which one person holds property for the benefit of another * Trust (bus ...
. Trust instruments are generally only used in relation to an ''inter vivos'' trust;
testamentary trust A testamentary trust (sometimes referred to as a will trust or trust under will) is a trust which arises upon the death of the testator, and which is specified in their will. A will may contain more than one testamentary trust, and may address a ...
s are usually created under a will.


Formalities

Although in most legal systems there are certain formalities associated with settling a trust, most legal systems impose few, if any, structures on the trust instrument itself. Historically, the concept of a trust is the intervention of the courts of equity to prevent a legal owner treating the property as beneficially his own; provided that state of affairs exists, a trust arises notwithstanding any lack of formality in relation to the form of the trust instrument. However, notwithstanding the flexible approach taken by the law, characteristically the legal profession has taken an extremely formalised approach to trust instruments. Not only are they invariably always executed under
seal Seal may refer to any of the following: Common uses * Pinniped, a diverse group of semi-aquatic marine mammals, many of which are commonly called seals, particularly: ** Earless seal, or "true seal" ** Fur seal * Seal (emblem), a device to impr ...
as a deed, but frequently the initial trust fund (usually a nominal amount), will actually be physically affixed to the trust instrument itself to prove that the initial trust property was transferred.The substantial trust fund is usually added later by a deed of addition. Some slightly unusual practices have arisen in relation to the drafting of trust instruments which, again, are rigidly adhered to by professionals in many common-law countries (although not the U.S.A.). For example, trust deeds will generally avoid all punctuation (including full stops) - to avoid confusion, all new sentences commence with a new, numbered, paragraph. Dates, including years, are conventionally spelled out in words rather than using figures. Part of the over-formalisation which attends the creation of trusts is justified by the significant tax implications which may follow if a trust were to be subsequently held to be
void Void may refer to: Science, engineering, and technology * Void (astronomy), the spaces between galaxy filaments that contain no galaxies * Void (composites), a pore that remains unoccupied in a composite material * Void, synonym for vacuum, a s ...
, as most professionally drafted trust instruments are prepared as a part of tax mitigation schemes. Most jurisdictions do not require trust instruments to be publicly filed (in contrast to wills). But in many jurisdictions they are subject to
stamp duty Stamp duty is a tax that is levied on single property purchases or documents (including, historically, the majority of legal documents such as cheques, receipts, military commissions, marriage licences and land transactions). A physical revenu ...
.


Provisions

The provisions of a trust instrument will vary according to the type of trust, and the nature of the trust property. *A bare trust over a single asset will characteristically have very few provisions. *A discretionary trust over a mixed bag of investments will usually have far greater provisions regulation the exercise and management of the trust fund. *A trust which is set up as a
unit trust A unit trust is a form of collective investment constituted under a trust deed. A unit trust pools investors' money into a single fund, which is managed by a fund manager. Unit trusts offer access to a wide range of investments, and depending on ...
will have additional specific provisions specific to the calculation of the NAV and acquisition and redemption of units. * Settled land act settlements have specific provisions relating to the underlying subject matter. *Trusts which are set up to protect vulnerable beneficiaries, such as blind trusts or
spendthrift trust A spendthrift trust is a trust that is created for the benefit of a person (often unable to control his/her spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of th ...
s will have specific provisions relating to the nature of the beneficiaries. However, in general, most trust instruments will have provisions which address the following aspects of the administration of the trust: #The name of the settlement and definitions and interpretation provisions #The legal nature of the trust (i.e. a trust for sale) #Powers to add and exclude beneficiaries #Trusts over property added to the trust fund #Power of appointment (i.e. distribution) #Trusts in default of appointment, and, sometimes, ultimate default trusts #General administrative powers of the trustees #Extended power of maintenance #Extended power of advancement #Usually, a trustee charging clause #Regulation of the appointment of new trustees #The
proper law The doctrine of the proper law is applied in the choice of law stage of a lawsuit involving the conflict of laws. Explanation When the jurisdiction is in dispute, one or more state laws will be relevant to the decision-making process. If the la ...
and forum and place of administration for the settlement #Often, an exclusion of settlor (and spouse) from benefiting from the trust (where required for tax reasons) #Usually, an indemnity for the trustees out of the trust fund Most trust instruments will then also have two schedules: #a schedule setting out the powers of the trustees (often in addition to any powers granted or implied by operation of law) #a summary of the initial trust fund (usually a nominal amount of money)


See also

*
Asset-protection trust An asset-protection trust is any form of trust which provides for funds to be held on a discretionary basis. Such trusts are set up in an attempt to avoid or mitigate the effects of taxation, divorce and bankruptcy on the beneficiary. Such trusts ...
* Back-bond in Scotland * Blind trust *
Express trust An express trust is a trust created "in express terms, and usually in writing, as distinguished from one inferred by the law from the conduct or dealings of the parties." Property is transferred by a person (called a trustor, settlor, or grantor) ...
* ''Inter vivos'' trust *
Offshore trust An offshore trust is a conventional trust that is formed under the laws of an offshore jurisdiction. Generally offshore trusts are similar in nature and effect to their onshore counterparts; they involve a settlor transferring (or 'settling') ...
*
Protective trust The Protective Trust is a form of settlement found in England and Wales and several Commonwealth countries. It has marked similarities to asset-protection trusts found in several offshore jurisdictions and US Spendthrift trusts. In such a trust ...
*
Spendthrift trust A spendthrift trust is a trust that is created for the benefit of a person (often unable to control his/her spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of th ...
*
Testamentary trust A testamentary trust (sometimes referred to as a will trust or trust under will) is a trust which arises upon the death of the testator, and which is specified in their will. A will may contain more than one testamentary trust, and may address a ...
*
Unit trust A unit trust is a form of collective investment constituted under a trust deed. A unit trust pools investors' money into a single fund, which is managed by a fund manager. Unit trusts offer access to a wide range of investments, and depending on ...


Footnotes

{{Reflist


Reference

Equity (law) Property law Wills and trusts Legal terminology