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A Family Trust is comprised of 3 parties: The Settlor, The Trustees and the Beneficiaries.
The Settlor (there can be more than one) sets the Trust up, names the Trustees and the Beneficiaries and gives the Trustees the initial Trust fund (usually $10.00). The Settlor is also usually (but not always) the person or persons who wish their assets to be owned by the Trust.
The Trustees administer the Trust assets on behalf of the beneficiaries. They have wide powers as to their method of doing this, but must at all times ensure that their actions are transparently in the best interests of the beneficiaries.
The Beneficiaries are the only people entitled to benefit from the Trust. In a family situation these will normally be husband, wife and children.
It is not unusual for the same person (or persons) to be Settlor, Trustee and Beneficiary, provided there are other provisions in place, ie an independent Trustee as well as additional beneficiaries etc.
One little known fact about Family Trusts is that they are not publicly registered. This is because they are not an entity within themselves, such as a company, but rather a collection of complex relationships, each legally binding in its own right. For this reason there are no naming restrictions.
A common sequence of events when a Trust is initially formed is that the Settlors (in a family situation) sell their major assets – say house, company shares and investments to the Trust at current market value. They also make a loan to the Trustees to enable them to purchase those assets, which are then fully transferred to the Trust, in the joint names of the Trustees.
The Settlors then progressively forgive repayment of the loan at the rate of $27,000 each per annum until the loan is fully discharged. For more detailed information on how this works see Family Trusts and Gifting
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