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Encyclopedia > Trust instrument

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 used to constitute a trust. Trust instruments are generally only used in relation to an inter vivos trust; testamentary trusts are usually created under a will. A deed is a legal instrument used to grant a right. ... In law a settlor is a person who settles property on express trust for the benefit of beneficiaries. ... This article or section does not cite its references or sources. ... An inter vivos trust is an express trust created by the settlor during his lifetime, as distinguished from a testamentary trust which arises upon the testators death, usually under his will. ... A testamentary trust is trust which arises upon the death of the testator, usually under his will. ... In the common law, a will or testament is a document by which a person (the testator) regulates the rights of others over his property or family after death. ...

Contents


Formalities

Although in most legal systems, there are certain formalities associated with settling a trust, most legal systems impose few, if any, strictures 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 as a deed, but not infrequently 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.[1] Seal on envelope A seal is an impression printed on, embossed upon, or affixed to a document (or any other object) in order to authenticate it, in lieu of or in addition to a signature. ...


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, curiously, 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 was to be subsequently held to be void, as most professionally drafted trust instruments are prepared as part a part of tax mitigation schemes. In law, void means of no legal effect. ... // Tax avoidance Tax avoidance is the legal utilization of the tax regime to ones own advantage, in order to reduce the amount of tax that is payable by means that are within the law. ...


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 form of tax that is levied on documents. ...


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 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 trusts 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: Note: the Unit Investment Trust (UIT) is a separate US fund type. ... In the context of mutual funds, net asset value is the total value of the funds portfolio less liabilities. ... A Blind trust is a trust in which the executors or those who have been given power of attorney have full discretion over the assets, and the trust beneficiaries have no knowledge of the holdings of the trust. ... A spendthrift trust is a trust that is created for the benefit of a person who is in debt (often because they are unable to control their spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit...

  1. The name of the settlement and definitions and interpretation provisions
  2. The legal nature of the trust (ie. a trust for sale)
  3. Powers to add and exclude beneficiaries
  4. Trusts over property added to the trust fund
  5. Power of appointment (ie. distribution)
  6. Trusts in default of appointment, and, sometimes, ultimate default trusts
  7. General administrative powers of the trustees
  8. Extended power of maintenance
  9. Extended power of advancement
  10. Usually, a trustee charging clause
  11. Regulation of the appointment of new trustees
  12. The proper law and forum and place of administration for the settlement
  13. Often, an exclusion of settlor (and spouse) from benefiting from the trust (where required for tax reasons)
  14. Usually, an indemnity for the trustees out of the trust fund

Most trust instruments will then also have two schedules: Choice of law is a concept within the field of the conflict of laws, relating to relationships between different nations, and in the United States between individual states. ... A forum selection clause is a clause in a contract in which the parties agree that any litigation resulting from that contract will be brought in a specific forum. ...

  1. a schedule setting out the powers of the trustees (often in addition to any powers granted or implied by operation of law)
  2. a summary of the initial trust fund (usually a nominal amount of money)

See also

An asset-protection trust is a term which covers a wide spectrum of legal structures. ... A Blind trust is a trust in which the executors or those who have been given power of attorney have full discretion over the assets, and the trust beneficiaries have no knowledge of the holdings of the trust. ... Where property is passed to a person but no gift is made, it is held for the owner, this is the Resulting trust; where property should for some reason of public policy or fairness or rule of Equity be held for someone other than the legal owner, this is either... An inter vivos trust is an express trust created by the settlor during his lifetime, as distinguished from a testamentary trust which arises upon the testators death, usually under his will. ... An offshore trust is simply a conventional trust that is formed under the laws of an offshore jurisdiction. ... The Protective Trust is a form of settlement found in England and Wales and several Commonwealth countries. ... A spendthrift trust is a trust that is created for the benefit of a person who is in debt (often because they are unable to control their spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit... A testamentary trust is trust which arises upon the death of the testator, usually under his will. ... Note: the Unit Investment Trust (UIT) is a separate US fund type. ...

External link

  • A sample U.S. trust instrument[1]

Footnotes

  1. ^ The substantial trust fund is usually added later by a deed of addition.

 
 

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