- WHICH TRUST FROM THIS
LIST DO MOST WEALTHY PEOPLE USE FOR ASSET PROTECTION?
- Constructive trust. Unlike an express
trust, a constructive trust is not created by an
agreement between a settlor and the trustee. A constructive trust is
imposed by the law as an "equitable remedy." This generally
occurs due to some wrongdoing, where the wrongdoer has acquired legal
title to some property and cannot in good conscience be allowed to
benefit from it. A constructive trust is, essentially, a legal
fiction. For example, a court of equity recognizing a plaintiff's
request for the equitable remedy of a constructive trust may decide that
a constructive trust has been created and simply order the person
holding the assets to deliver them to the person who rightfully should
have them. The constructive trustee is not necessarily the person who is
guilty of the wrongdoing, and in practice it is often a bank or similar
organization. The distinction may be finer than the preceding exposition
in that there are also said to be two forms of constructive trust, the
institutional constructive trust and the remedial constructive trust.
The latter is an "equitable remedy" imposed by law being truly
remedial; the former arising due to some defect in the transfer of
property.
- Directed trust. In these types, a directed
trustee is directed by a number of other trust participants in
implementing the trust's execution; these participants may include a
distribution committee, trust protector, or investment advisor. The
directed trustee's role is administrative which involves following
investment instructions, holding legal title to the trust assets,
providing fiduciary and tax accounting, coordinating trust participants
and offering dispute resolution among the participants
- Dynasty trust (also known as a generation-skipping
trust). A type of trust in which assets are passed down to the
grantor's grandchildren, not the grantor's children. The children of the
grantor never take title to the assets. This allows the grantor to avoid
the estate taxes that would apply if the assets were transferred to his
or her children first. Generation-skipping trusts can still be used to
provide financial benefits to a grantor's children, however, because any
income generated by the trust's assets can be made accessible to the
grantor's children while still leaving the assets in trust for the
grandchildren.
- Express
trust.
An express trust arises where a settlor deliberately and consciously
decides to create a trust, over their assets, either now, or upon his or
her later death. In these cases this will be achieved by signing a trust
instrument, which will either be a will
or a trust deed. Almost all trusts dealt with in the trust industry are
of this type. They contrast with resulting and constructive trusts. The
intention of the parties to create the trust must be shown clearly by
their language or conduct. For an express trust to exist, there must be
certainty to the objects of the trust and the trust property. In the USA
Statute of Frauds provisions require
express trusts to be evidenced in writing if the trust property is above
a certain value, or is real estate.
- Fixed trust. In a fixed trust,
the entitlement of the beneficiaries is fixed by the settlor. The
trustee has little or no discretion. Common examples are:
- a trust for a minor
("to x if she attains 21");
- a life interest
("to pay the income to x for her lifetime"); and
- a remainder
("to pay the capital to y after the death of
x")
- Hybrid trust. A hybrid trust
combines elements of both fixed and discretionary trusts. In a hybrid
trust, the trustee must pay a certain amount of the trust property to
each beneficiary fixed by the settlor. But the trustee has discretion as
to how any remaining trust property, once these fixed amounts have been
paid out, is to be paid to the beneficiaries.
- Implied trust. An implied trust, as
distinct from an express trust, is created where some of the legal
requirements for an express trust are not met, but an intention on
behalf of the parties to create a trust can be presumed to exist. A
resulting trust may be deemed to be present where a trust instrument is
not properly drafted and a portion of the equitable title has not been
provided for. In such a case, the law may raise a resulting trust for
the benefit of the grantor (the creator of the trust). In other words,
the grantor may be deemed to be a beneficiary of the portion of the
equitable title that was not properly provided for in the trust
document.
- Incentive trust. A trust that uses distributions
from income or principal as an incentive to encourage or discourage
certain behaviors on the part of the beneficiary. The term
"incentive trust" is sometimes used to distinguish trusts that
provide fixed conditions for access to trust funds from discretionary
trusts that leave such decisions up to the trustee.
- Inter vivos trust (or living trust).
A settlor who is living at the time the trust is established creates an inter
vivos trust.
- Irrevocable trust. In contrast to a
revocable trust, an irrevocable trust is one in which the terms of the
trust cannot be amended or revised until the terms or purposes of the
trust have been completed. Although in rare cases, a court may change
the terms of the trust due to unexpected changes in circumstances that
make the trust uneconomical or unwieldy to administer, under normal
circumstances an irrevocable trust may not be changed by the trustee or
the beneficiaries of the trust.
- Offshore
trust.
Strictly speaking, an offshore trust is a trust which is resident in any jurisdiction other than
that in which the settlor is resident. However, the term is more
commonly used to describe a trust in one of the jurisdictions known as offshore financial centers or,
colloquially, as tax havens. Offshore trusts are usually
conceptually similar to onshore trusts in common law countries, but
usually with legislative modifications to make them more commercially
attractive by abolishing or modifying certain common law restrictions.
By extension, "onshore trust" has come to mean any trust
resident in a high-tax jurisdiction.
- Personal injury trust. A personal injury
trust is any form of trust where funds are held by trustees for the
benefit of a person who has suffered an injury and funded exclusively by
funds derived from payments made in consequence of that injury.
- Private and public trusts. A private trust
has one or more particular individuals as its beneficiary. By contrast,
a public trust (also called a charitable trust) has some
charitable end as its beneficiary. In order to qualify as a charitable
trust, the trust must have as its object certain purposes such as
alleviating poverty, providing education, carrying out some religious
purpose, etc. The permissible objects are generally set out in
legislation, but objects not explicitly set out may also be an object of
a charitable trust, by analogy. Charitable trusts are entitled to
special treatment under the law of trusts and also the law of taxation.
- Protective trust. Here the terminology
is different between the UK and the USA:
- In the UK, a
protective trust is a life interest which terminates on the happening
of a specified event such as the bankruptcy of the beneficiary or any
attempt by him to dispose of his interest. They have become
comparatively rare.
- In the USA, a protective
trust is a type of trust that was devised for use in estate
planning. (In another jurisdiction this might be thought of as one type
of asset protection trust.) Often a person, A,
wishes to leave property to another person B. A however
fears that the property might be claimed by creditors before A
dies, and that therefore B would receive none of it. A
could establish a trust with B as the beneficiary, but then A
would not be entitled to use of the property before they died.
Protective trusts were developed as a solution to this situation. A
would establish a trust with both A and B as
beneficiaries, with the trustee instructed to allow A use of the
property until they died, and thereafter to allow its use to B.
The property is then safe from being claimed by A's creditors,
at least so long as the debt was entered into after the trust's
establishment. This use of trusts is similar to life
estates and remainders, and are frequently used as
alternatives to them.
- Purpose
trust.
Or, more accurately, non-charitable purpose trust (all charitable trusts
are purpose trusts). Generally, the law does not permit non-charitable
purpose trusts outside of certain anomalous exceptions which arose under
the eighteenth century common law (and, arguable, Quistclose trusts). Certain
jurisdictions (principally, offshore jurisdictions) have enacted
legislation validating non-charitable purpose trusts generally.
- Resulting trust. A resulting trust is
a form of implied trust which occurs where (1) a trust fails, wholly or
in part, as a result of which the settlor becomes entitled to the
assets; or (2) a voluntary payment is made by A to B in circumstances
which do not suggest gifting. B becomes the resulting trustee of A's
payment.
- Revocable trust. A trust of this kind
may be amended, altered or revoked by its settlor at any time, provided
the settlor is not mentally incapacitated. Revocable trusts are becoming
increasingly common in the US as a substitute for a will
to minimize administrative costs associated with probate and to provide
centralized administration of a person's final affairs after death.
- Secret
trust.
A post mortem trust constituted externally from a will but
imposing obligations as a trustee on one, or more, legatees of a will.
- Simple
trust.
- In the US
jurisdiction this has two distinct meanings:
- In a simple trust
the trustee has no active duty beyond conveying the property to the
beneficiary at some future time determined by the trust. This is also
called a bare trust. All other trusts are special trusts
where the trustee has active duties beyond this.
- A simple trust in
Federal income tax law is one in which, under the terms of the trust
document, all net income must be distributed on an annual basis.
- In the UK a bare or
simple trust is one where the beneficiary has an immediate and absolute
right to both the capital and income held in the trust. Bare trusts are
commonly used to transfer assets to minors. Trustees hold the assets on
trust until the beneficiary is 18 in England and Wales, or 16 in
Scotland.[17]
- Special trust. In the US, a special
trust, also called complex trust, contrasts with a simple trust (see
above). It does not require the income be paid out within the subject
tax year. The funds from a complex trust can also be used to donate to a
charity or for charitable purposes.
- A Spendthrift trust is a trust put into
place for the benefit of a person who is unable to control their
spending. It gives the trustee the power to decide how the trust funds
may be spent for the benefit of the beneficiary.
- Standby Trust or Pourover Trust.
The trust is empty at creation during life and the will transfers the
property into the trust at death. This is a statutory trust.
- Testamentary trust or Will Trust.
A trust created in an individual's will
is called a testamentary trust. Because a will can become effective only
upon death, a testamentary trust is generally created at or following
the date of the settlor's death.
- Unit trust. A unit
trust is a trust where the beneficiaries (called unitholders)
each possess a certain share (called units) and can direct the trustee
to pay money to them out of the trust property according to the number
of units they possess. A unit trust is a vehicle for collective investment, rather
than disposition, as the person who gives the property to the trustee is
also the beneficiary.[18]
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2 comments:
won't all these trusts change under common law?
I don't trust any Trust.
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