Chapter 18 Flashcards
(12 cards)
Who are the three main parties to a trust
1- The founder
2- Trustee
3- Beneficiaries
The trust property control act defines a trust as
An arrangement through which the property of one person is by virtue of a trust instrument made over or bequeathed to another person, the trustee to be administered according to the provisions of the trust act to the beneficiaries designated in the trust instrument.
What are the four characteristics of a trust
1- The relationship is created by a person known as a founder or donor.
2- The founder places the assets under the control of a person known as a trustee.
3- This can be done either during the founders lifetime or at his deat.
4- The purpose is to benefit third parties.
What is a bewind trust
It involves someone bequeathing their assets to their minor child, but these assets are placed under the control of the trustee until the minor reaches majority. Child has ownership of the trust assets, but they are under the control of the trustee.
There are no fundamental difference between a family trust and a business trust, except that in a business trust
1- Trustees have the power to take business risks and trade with the assets that are held in the trust.
2- Beneficiaries have the right to sell their interest in the trust when they choose to do so.
What is the difference between a testamentary trust and trust inter vivos
A testamentary trust is formed at the death of the founder of the trust.
Trust inter vivos is formed during the lifetime of the testator.
What is the difference between a business trust and family trust
A business trust gives trustees extensive powers to carry on business and gives beneficiaries the right to sell their interest in a trust to a third party.
A family trust is formed primarily for the protection and preserve assets for future generations.
What are the different type of trusts
1- A statutory trust
2- A court-order trust
3- A charitable trust
4- International trusts
How to form a valid trust
1- There must be an intention of the founder to create a trust and the intention must be in such a way that it creates an obligation.
2- The object of the trust must be lawful.
3- The trust pretty must be defined with certainty.
4- The beneficiaries must be clearly defined.
5- There must be at least one beneficiary.
6- The trust should be reduced to writing in a trust deed.
What are the duties of a trustee
1- A trustee must open a separate trust account at a banking institution.
2- A trustee must act with utmost good faith.
3- A trustee must keep record indicating that the property is held by the trustee in trust.
4- A trustee must give effect to the terms of the trust deed.
5- A trustee must not expose the assets of the trust to undue risk.
6- A trustee must invest the trust property productively.
7- A trustee must exercise discretion at all times regarding the trust.
8- A trustee must account to the beneficiaries.
9- A trustee must act within their powers granted in terms of the trust deed.
What are the powers of a trustee
Derives his powers from the trust deed. If a trust makes no provisions for a particular power, it is inferred that the founder intended that the trustee not have those powers. Reason is because the trustee should protect and preserve the trust assets and this should be done risk free.
What are the rights of the beneficiaries
A trust must have beneficiaries or it fails. A trust without a beneficiary is nullity. A beneficiary should be identified. This means that a trust can provide for beneficiaries who exist or are yet to be born. The founder and trustee can be beneficiaries. A trust can also be a beneficiary.
