Trusts can be registered under two mechanisms: –
- Registration under the Registration of Documents Act: A trust may be registered pursuant to the Registration of Documents Act. It is important to note that such registration does not attribute corporate status to the trust and therefore the trustees usually bear joint and several liability.
- Registration under the Trustee (Perpetual Succession) Act: A trust registered under the Trustee (Perpetual Succession) Act achieves the status of a body corporate, thereby acquiring a distinct legal persona.
The trust is therefore capable of holding property in its own name, initiating legal actions, being subject to legal proceedings, and enjoys perpetual succession.
Family Trust notes.
- What is the purpose/objects of the trust?
When setting up a trust it is important to come up with the objects or the purpose of the Trust e.g. Is the trust being set up to pay school fees for the beneficiaries or to provide medical care for the beneficiaries up to their old age etc.
2. What is the criteria for appointing trustees?
Who will be the initial trustees of the trust and what criteria should any other party who is to be appointed as a trustee to meet before their appointment?
In family trusts usually the persons setting up the trust (the settlor) are usually the first trustees of the trust and as the children (mainly beneficiaries become of age) they are later added to be trustees. This does not limit independent third parties from becoming trustees if they meet the set criteria.
- Who are the beneficiaries of the trust?
The beneficiaries of the trust should be identifiable as they are the parties who benefit from the existence of the trust.
- Assets to be owned under a trust.
This should be assets that the creator of the trust (the settlor) has identified and agreed to relinquish control over, assets that are being held for speculative purposes should not be placed in a trust.
- Dispute Resolution
The dispute resolution mechanism under a family trust should be negotiation and mediation.
Arbitration should be as a last result. This is due to the nature of family relationships the court process is adversarial and does not help parties in preserving their relationship, further given that the dispute would be a matter of public record whereas mediation and arbitration are private alternative dispute resolution mechanisms.
- Tax implications
It is important to receive accounting advice in regards to the tax implications that may arise from transferring any assets from individual ownership to a holding company that is owned by the trust. Or in circumstance where the property is to be owned directly under the Trust.
“The information provided in this article is intended for general legal advice and does not constitute legal advice for any specific transaction or case. It is advisable to retain a legal adviser for specific transactions.”
