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1.1.T.60 Trust

Definition

For the purposes of FA, a trust is an arrangement in which a settler transfers property to one or more trustees, who hold it for the benefit of one or more persons who are entitled to enforce the trust, if necessary by action in court.

 

Categories of trusts

There are 2 categories of trusts:

  • statutory trusts, and
  • non-statutory trusts.

 

Statutory trusts

Statutory trusts:

  • are created by law,
  • are usually established to look after the affairs of a recipient who is incapable, or legally unable to attend to their own affairs, and
  • exist if property is held by:
    • public trustees,
    • Workers Compensation Boards, and
    • courts.

Explanation: Although the description of 'statutory trust' is applied, a trust in the strictest sense is not created. The Federal Court, in Flannery v Secretary of the Department of Social Security, has recognised that public trustees and similar bodies are managers rather than trustees of property.

 

Non-statutory trusts

The following table lists the different types of non-statutory trusts.

If a trust…

Then it is…

is established with a written trust deed,

Explanation: Trust deeds do not vary the property rights of the parties to the trust until they come into effect.

- an express trust, or

- a declared trust.

Example: Family trusts.

does not have a trust deed, but a court decides that it exists,

- a constructive trust,

- a resulting trust, or

- an implied trust.

 

Ownership of non-statutory trusts

When a non-statutory trust is established the trustee becomes the legal owner of the assets held in trust, however, they are not entitled to use the assets or income for personal benefit. A trustee is bound to act in accordance with the terms that are expressed in the trust deed.

 

The beneficial ownership of the assets rests with the beneficiaries of the trust.

 

Trust deed

The majority of non-statutory trusts are expressed in a trust deed which contains the:

  • identity of the trustee(s),
  • identity of the beneficiaries, and
  • nature of the trust.

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Last reviewed: 1 June 2012


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Last Edited: 12/04/2013 4:41:06 PM


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