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Here are some of the most important Types of trusts.

REVOCABLE TRUST

With a revocable trust the settlor reserves the right to revoke the trust and cause the trustee to return the trust fund. In most cases the settlor also retains the right to modify or amend the trust and to cause distributions to be made to beneficiaries. Because it is so flexible, the revocable trust is very attractive to most international investors and will usually be accepted by the US tax authorities as a grantor trust. But conversely, a revocable trust may not always be acceptable to other tax authorities as a real trust (i.e. a real alienation of assets from the settlor’s estate).

IRREVOCABLE TRUST

This is the most common structure in international tax planning. The settlor irrevocably transfers his or her assets to a trustee and thereafter has no control over the assets.

DISCRETIONARY TRUST

Under a discretionary trust the settlor generally has no direct power to revoke or amend the trust or its terms. The trustee has much more responsibility and discretion, and typically either no beneficiaries or only a class of beneficiaries are mentioned on the trust deed. In exercising its powers the trustee is guided (but not bound) by the settlor’s intentions and purpose in creating the trust. These can be set out in a letter to the trustee when the trust is established. Many discretionary trusts also provide for a protector, i.e. someone designated by the settlor whom the trustee should consult before exercising its discretion and who has the power to remove and replace the trustee.

INTEREST IN POSSESSION TRUST

In this case the settlor alienates the assets irrevocably but retains the income from the assets during his or her lifetime. The trust will often provide for named beneficiaries in respect of the capital and income after the death of the settlor.

Yes, but not by the settlor and not always directly. A protector will invariably have the right to either replace a trustee or add trustees so that the original trustee loses control of the assets. In practice, a trustee will usually listen carefully to the opinions of the settlor and often voluntarily withdraw from office if suggested by the settlor, although under no legal obligation to do so.

Generally, a trust can hold any type of asset. As a practical matter, however, assets held directly in the trustee’s name should only be passive financial investments. Assets such as real estate, an interest in an operating business or a trading account, should be held indirectly by the trustee through a private investment company (PIC), which in turn holds the assets directly. The assets would be managed directly by the directors and officers of the PIC rather than the trustee. As shareholder of the PIC, the trustee selects the PIC’s directors who in turn select the officers. All these selections are made only after giving due consideration to the wishes of the settlor.

Because trusts can be designed to fulfil the many different objectives and needs of the settlor, there are many different kinds of trusts. For the international investor the most important trusts are the revocable trust, the discretionary trust and the interest in possession trust.

Other types of trusts include charitable trusts, purpose trusts, accumulation and maintenance trusts and grantor trusts.

A trust offers many significant advantages including confidentiality, continuity, security, flexibility, tax savings, pre-mortem estate planning, reduced sovereign risk and asset protection.

Generally, the owner of property has both the legal title and the beneficial interest in the property. Legal title is that part of ownership which enables the owner to control the property. Examples include the power to open or close bank or investment accounts, or to buy or transfer property. The holding of legal title is generally shown by the owner’s name on the ownership documentation (e.g. investment account forms, title deeds, share certificates or registers, etc.).

The beneficial interest in property is the entitlement to the property’s economic benefits. Examples include interest, dividends, rents or proceeds from the sale of property.

A trust is an agreement between two parties: the person who creates the trust and the person, institution or organization responsible for the administration of the trust (also known as the trustee). As a trustee, we manage whatever assets are placed in the trust according to your wishes to benefit a third party, your beneficiary.

A trust is a special relationship created when one person (the “settlor”) transfers legal title to property (the “trust fund”) to another person (the “trustee”) in trust. This is for the benefit of persons (the “beneficiaries”) specified by the settlor, to be held and administered according to the settlor’s specific instructions as contained in a written agreement (the “trust deed”).

The trust deed specifies the terms and conditions under which the trustee holds title to the trust fund, including certain duties and obligations of the trustee that are the highest imposed by law. In general, these require the trustee to administer the trust fund for the sole benefit of the beneficiaries, who have a beneficial interest in the trust fund.