In general terms, trusts are widely used for asset protection, investment and business purposes. The following types of trusts are frequently encountered in Australia:
- Fixed trusts 固定信托
- Unit trusts 單位信托
- Discretionary trusts 全權信托
- Family trusts 家庭信托
- Bare trusts 簡易信托
- Hybrid trusts 混合信托
- Testamentary trusts遺囑信托
- Charitable trusts 慈善信托
- Superannuation trusts 退休金信托
A trust is essentially a relationship which imposes an obligation on a person or other entity to hold property for the benefit of beneficiaries. A trust deed would be required as it sets out the rules for the operation of the trust, including the details of who the beneficiaries are, who the trustees are and how the trust will be administered. There can be more than one trustee or more than one beneficiary. Also, the trust asset can be real estate, shares, artwork, cars, bank accounts or cash etc.
A trustee is the legal owner of the property which is held on trust for the benefit of beneficiaries. The trustee can be an individual, a group of individuals or a company. Trustees have legal control of the trust assets and manage them as instructed in the trust deed. Most importantly, the property must be used only for the benefit of the beneficiaries, which is known as the fiduciary duty beared by the trustees. Should there be any dispute the courts will always enforce this duty rigorously.
A beneficiary is an individual, a group of individuals or a company who is entitled to receive the benefits from the trust ultimately, with or without any assistance by a third party.
An example of a trust
A father opens a bank account for investment in trust for his son when he is born. In this case, the father is the trustee and the trust’s beneficiary is the son. The father holds the bank account in trust for his son until he becomes 18 years old, after which he will have the autonomy to make his own decisions in relation to the ownership of the bank account. Before he turns 18, the bank account name would remain to be the father’s, meaning the father is the legal owner and the son is the beneficial owner of the bank account. When the son is of 18 years old age, he can choose to remove the father as trustee, appoint another person to be the trustee or place himself as the legal owner. Point to note here is that there is no trust if one holds both the legal and beneficial ownership; that is in the event of the son deciding to possess the bank account himself.
In property transactions, people may easily come across XXX Pty Ltd act trustee for XXX Trust. Applying what we mentioned above, the company (Pty Ltd) is the legal owner and the beneficiaries of the XXX Trust are the beneficial owners.
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