Lecture on Trusts

Overview

• Topic: Trusts
• Types of Trusts: Testamentary Trusts, Inter Vivos Trusts
• Basic Definitions:
  • Beneficiary: The person who benefits from the trust assets.
  • Settler: The person who creates the trust and transfers property into it.
  • Trustee: The person or entity that manages the trust according to its terms.

Key Concepts

• Nature of a Trust: Not a legal entity, but a relationship that separates legal ownership from beneficial enjoyment.
• Role of Settler: Transfers property (cash, investments) into the trust for beneficiaries.
• Role of Trustee: Manages the trust property as per the trust deed.
  • Trust Deed: Legal document governing the terms and conditions of the trust, including income and capital distribution.

Types of Trusts

Inter Vivos Trusts

• Definition: Trusts set up while the settler is alive.
• Taxation: Treated as separate taxpayers, typically taxed at the highest rate. Income is often distributed to claim a deduction.

Testamentary Trusts

• Definition: Trusts that come into effect upon the settler's death, outlined in a will.
• Taxation: Used to have significant tax advantages, but these have been largely removed. Now taxed similarly to inter vivos trusts.

Purpose of Trusts

• General Use: To manage assets for someone else, often when there's a lack of trust.
• Examples: For children, dependents, individuals with disabilities, etc.

Additional Types of Trusts

• Mentioned but not detailed:
  • Alter Ego Trusts: Used for probate.
  • Trusts for Income Splitting
  • Trusts for Professional Corps