YOUR FUTURE STARTS HERE
I am insolvent. May I be a trustee of a trust?
There is a popular rumor that an insolvent can’t be the trustee of a trust. This is untrue and we will advise you on this.
The Layman's definition of a trust
A Trust is a fund which is set up by the “Settlor” or “Donor” over which the trustees take control on behalf of the beneficiaries appointed by the Settlor. The rules of the fund or trust are set out in a document called the “Trust Deed”
PROTECT YOUR ASSETS
Protect what you have worked so hard for
Differences: Family Trust, Discretionary Trust, Vesting Trust and Business Trust?
EXAMPLE OF A BAD TRUST DEED
Over the many years that we have set up trusts I have often come across a situation which I will use as a case study
A lady, who is also an attorney by profession, consulted with me regarding her trust. The situation was as follows – when she was a small child her parents set up a trust which owned a very successful hotel. When she was eight years old her parents died in a motorcar accident and her uncle was appointed as trustee of the trust. Because they wanted the trust assets to be protected, the trust was “discretionary” trust which meant that the assets did not vest in my client but it indeed vested under the control of the trustees who had full power to pay benefits (capital and/or income) when they wanted to do so and in whatever amount they decided to pay out. The uncle then paid for our client’s school tuition as well as her university tuition. Once she qualified as a lawyer he stopped paying her any benefits from the trust. My client is about 45 years old and she has not received a single cent from the trust in the past twenty years. She has taken the matter to court on three occasions and on all these occasions the court simply said that it was the wishes of the settler (her father) that the trustee succeeding him after his death shall have such wide powers. What the uncle does with the trust’s money is, whenever there is a profit he reinvests it in the hotel so as to create a larger management fee for himself. He has thus in fact inherited the hotel as a source of income. In our practice we make absolutely sure that this situation for example can never occur.
Don’t let this be you!
We have been involved in the drawing up and registration of trusts for many years. The most common trust that is drawn up is the “discretionary family trust”.