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Glossary of Trust Terms



Appointer

The Appointer generally holds the power to appoint and remove trustees, but occasionally they are also given supervisory powers. The trustee may need the Appointor's consent, for example, to add or exclude beneficiaries or to vary the Trust Deed. An Appointer has same duties of honesty and fidelity as a trustee.

Beneficiary

A person or entity entitled to benefit from the trust. Beneficiaries can be further subdivided into fixed beneficiaries and discretionary beneficiaries:

  • A fixed beneficiary has a legal interest in the assets of the trust.

  • A discretionary beneficiary merely has the hope that the trustees will exercise their discretion in his or her favour.

Discretionary Trust

A discretionary trust is a trust in which the beneficiaries can only benefit if the trustees’ decide to exercise their discretion in their favour.

Family Trust

A family trust is not a separate category of trust. Generally speaking, it is a discretionary trust settled for the benefit or a particular family.

Gifting

When property (particularly a house) is sold to a trust, it is rarely paid for immediately. A debt is created, which is progressively forgiven by the seller. Prior to 2011, the maximum gift you could make to a trust was $27,000.00 per year. The debt can now be forgiven in full, but the gift will be brought into account when assessing any application for a residential care subsidy.

Memorandum of Wishes (occasionally referred to as a Memorandum of Guidance)

A document in which the settlor of a trust suggests, recommends or requests that the trust property be dealt with in a particular way.

Minutes

Minutes are the written record of a meeting. Minutes of meetings between trustees are not generally accessible to beneficiaries.

Perpetuity (now referred to as “the maximum duration of a trust”).

A trust can only remain in existence for a certain period. Trust Deeds generally fix this at 80 years. The Trusts Act 2019 extended the maximum duration of a trust to 125 years.

Resettlement

Resettlement is where assets are removed from one trust and resettled on another trust. Resettlement can also occur where a trust is changed so much that the original trust effectively ceases to exist.

Resolution

A Resolution is a decision made by the trustees pursuant to a power set out in the Trust Deed.


Settlor

The person or persons who set up a trust.

Trust

A trust is an arrangement whereby a person (the Settlor) transfers legal ownership of assets to others (Trustees) to be held for the benefit of persons named by the settlor (the Beneficiaries).

Trust Deed

A document that records the Settlor, Trustees and Beneficiaries, the terms of the trust and the powers the trustees can exercise when administering it.

Trustee

A person or entity who holds legal title to the trust assets for the benefit of the beneficiaries.

Trustee Duties

Trustees are required to administer the trust honestly and in good faith for the benefit of the beneficiaries. These duties are imposed on them by the general law.

Vesting

Vesting occurs when a person obtains an absolute right to some present or future interest in property.



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