Please enable JavaScript.

Coggle requires JavaScript to display documents.

Week 2 Types of Trusts - Coggle Diagram

- - - - the person is both the trustee and the settlor
  - - - name of the trustee
      - the exact identification of the property
      - names of the beneficiaries
      - the terms of the trust
  - - - where the trust is intended to benefit one or more natural or corporate persons, or
        a public trust, where its purpose is recognised as charitable in law and for public benefit
      - Private trusts are formed for the benefit of specific beneficiaries or classes of beneficiaries
      - created
        
        settlor’s lifetime (i.e. inter vivos)
        
        will
        
        Testamentary trusts are created pursuant to the terms of a will.
    - - Fixed
        
        Beneficiaries
        
        Beneficiaries of a fixed trust have fixed interests in the income and capital of the trust property, and can therefore enforce both the administration and distribution of the property of the trust
        
        They have an equitable property right in the trust property and can enforce both the administration and the distribution of property under the trust.
        
        trustee
        
        If a trustee does not execute these duties, he or she will be in breach of trust
        
        trustee of a fixed express trust generally has very little discretion as to how the trustee powers may be exercised
        
        the powers and duties of a trustee are set out in the trust deed
      - Discretionary
        
        Trustee
        
        trustees of a discretionary trust have an absolute discretion to apply the income and capital of the trust property to the beneficiaries.
        
        Chief Commissioner of Stamp Duty (NSW) v Buckle (1998) 192 CLR 226.
        
        trustee’s discretions will include
        
        Selecting ‘from the designated range of objects of the trust those who are to receive benefits of income, capital or both;
        
        Deciding the amount or proportion of income or capital to be allocated to the selected object or objects; and
        
        Deciding not to allocate benefits to some objects or, indeed, to allocate benefits to one object to the exclusion of all the others’
        
        trustee will be subject to any obligations set out in the instrument as well as those imposed by equity and statute.
        
        Beneficiaries
        
        Therefore, the beneficiaries of a discretionary trust may have no enforceable claim to these funds until the trustee elects to exercise the discretion in their favour.
        
        Cypjayne Pty Ltd v Rodskog [2009] NSWSC 301 [41]
        
        Potential beneficiaries in a discretionary trust (i.e. those to whom income or capital is yet to be applied) have a right to due administration of the trust
        
        Beneficiaries of a discretionary trust do not have a proprietary interest in the trust property
        
        They also have the right to be considered by the trustee in the exercise of the trustee’s powers
        
        Re Smith [1928] Ch 915; Fay v Moramba Pty Ltd [2009] NSWSC 1428 [39].
        
        there are distinctions between the rights of beneficiaries of a discretionary trust depending on whether the trust is exhaustive or non-exhaustive
        
        exhaustive trust
        
        requires the trustee to distribute income to the beneficiaries
        
        non-exhaustive trust
        
        the trustee has the option of accumulating the trust income
    - - is a trust under which the only obligation of the trustee is to distribute the trust property to the beneficiary upon demand
        
        Thorpe v Bristile Ltd (1996) 16 WAR 500; Jessup v Lawyers Private Mortgages Ltd [2006] QCA 432; Wade v Wade [2009] WASC 118.
      - The term bare trust was defined by Gummow J in Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271, 281
        
        defined bare trust as a trust under which the trustee of trustees hold property without any interest therein, other than that existing by reason of the office of the legal title as trustee, and without any duty or further duty to perform, except to convey it upon demand to the beneficiary or beneficiaries or as directed by them, for example, on sale to a third party.
      - Like any other trustee, the trustee of a bare trust has an obligation to preserve the trust property
        
        CGU Insurance Ltd v One Tel Ltd (in liq) (2010) 242 CLR 174, 182-3
      - One example of a bare trust is the circumstance in which a person has paid a purchase price for land. The vendor may still be in possession, though will hold the land on trust for the purchaser
        
        Stern v McArthur (1988) 165 CLR 489, 523
    - - a trust generally requires a beneficiary, in certain circumstances a valid trust can be created for a charitable purpose
        
        Attorney-General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 139, 144
      - may be created inter vivos or by will and must fulfil certainty of intention and subject matter
      - Critical to a charitable trust is that its ultimate beneficiaries are members of a class of persons that represents a section of the community sufficient to meet the ‘public benefit’ criterion.
        
        four categories of charitable trust
        
        Trusts for the relief of poverty;
        
        Trusts for the advancement of education;
        
        Trusts for the advancement of religion; and
        
        Trusts for purposes beneficial to the community.
      - Charitable trusts are under the control of the court
        
        court has the power to review the administration of a charitable trust and ‘to execute the trust where the trustees fail to do so’
        
        charitable trusts attract taxation benefits and have no specific beneficiaries who can enforce the terms of the trust deed, the requirements as to what constitutes a charitable trust are strictly construed by the courts
    - - trading trusts
        
        used by business as they are subject to different tax regimes and reporting mechanisms
      - unit trusts
        
        corporate trustee invest trust fund for beneficiaries
        
        beneficiaries are based on the number of uniit they have purchased to enter the scheme
        
        AIT Investments group pty ltd v Markham Property FUnd No 2 Pty Ltd [2015] NSWSC 216
      - Superannuation Trust
        
        provides retirement and other benefits to their members
    - - are established for the benefit of a family group
      - main advantage of the family trust is the associated taxation benefits
        
        capacity to split income between family members can lessen the impact of taxation
      - take the form of a discretionary trust held by a family member or ‘a proprietary company in which the family members are shareholders and directors