Trusts:

A trust is a special legal relationship that exists between a trustee, beneficiary and involves ‘trust property’. A person who, either alone or jointly with another or others, has property which he or she holds, or rights which he or she is bound to exercise, for or on behalf of a person or persons or for the accomplishment of some particular purpose or purposes, holds the property or rights on trust for that person or those persons or that purpose or those purposes and is called a trustee. Each person for whom property or rights are held on trust is called a beneficiary or cestui que trust. Inherent in the trust is that the trustee owes fiduciary duties to the beneficiaries. Generally, a person cannot be the sole trustee and beneficiary of a trust because then the legal and equitable title are unseparated and coextensive. Although a trust is treated as a ‘relationship’, an alternative approach has been to describe it as an ‘obligation’. The obligations of a trustee are equitable and are enforceable only in a court having equitable jurisdiction. Even though the trustee’s obligations are personal obligations they are also annexed to the trust property, so that the beneficiary has rights of a proprietary nature constituting an equitable estate in the property, which rights are enforceable against any subsequent holders of the property other than a purchaser for value of the legal interest without notice (or an innocent third party that later acquires the trust property with no knowledge of the equitable interest by trust). A trust is a vehicle or device that may be very useful for wealth generation, investment, tax minimisation and distribution of income and capital. A qualified Asset Protection and Trusts Lawyer may have regard to your circumstances and advise you of the suitable trust structure that is compatible with your needs.

A thorough understanding and working knowledge of trust law is often helpful in optimising your trust structure and achieving your objectives. At the pillar of any trust is the fiduciary relationship that exists between the trustee and the beneficiaries, so that the trustee must exercise his or her rights, duties and powers in a fiduciary capacity. Some of the inhibitions and constraints imposed by that fiduciary relationship apply to other fiduciaries as well as to trustees, and they apply to a trustee as a fiduciary rather than only as a trustee, and therefore fall outside the range of those trustee duties where non-compliance will constitute a breach of trust. For example, the restrictions relating to the purchase by a trustee on his or her own account of the trust property or of the interest of a beneficiary in the trust property, are conditions arising from the wider fiduciary capacity of the trustee rather than duties pertaining exclusively to the trust relationship. On this basis, those purchase restrictions would not be subject to a statute relating to the limitation of actions expressed to apply (with some exceptions, not relevant here) in respect of breach of trust.

There are many different types of trusts with unique features and advantages. You may prefer the flexibility and tax advantages of a discretionary trust; require the fixed interest and entitlement from a unit trust or wish to operate your own family business through a trading trust. Thorough and sound legal advice in this area of complex, intricate law may be of immense value in determining the appropriate trust structure that is suitable for your needs.

If you need further legal advice on your matter, you may book an appointment with us by telephone on (02) 9233 4048 or email us at info@navado.com.au. 

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