Legt
Business Structures (Part 2)
Trusts, Associations and Companies: [Class 3]
Read: Ch 3-4 Australian Corporate Law (4th ed, 2013)
LEGT 2741 Anil Hargovan
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What is a trust?
• ..is an equitable obligation, binding a person (called trustee) to deal with property over which he/she has control (trust property) for the benefit of persons (called beneficiaries) of whom he/she may be one (but not sole), and any one of whom may enforce the obligation. • Note: Trust is not itself a legal entity. See further: Australian Corporate Law (4th ed, 2013) at pp 63-72
LEGT 2741 Anil Hargovan 2
Features of Trusts:
• Formalities (settlor; trustee; the beneficiary; trust property) • Control/management (by trustee) • Liability (personal liability by trustee) • Property (owned by trustee) • Taxation (if trust income is fully distributed, beneficiaries pay tax) • Duration (rule against perpetuities)
LEGT 2741 Anil Hargovan
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Essential elements: Trust
• 1. Settlor — person who creates the trust by donating or transferring property to the trust. It is not uncommon for the creator to establish a trust with a nominal amount of money (for example, $50) as trust property. Thereafter, settlor no longer has control over the trust property – it legally belongs to the trustee. – Note: a trust can be created in a variety of ways. When trusts are created unintentionally (such as constructive trusts imposed by the court as a result, for example for breach of partner’s or director’s fiduciary duty), the need for a settlor does not arise. • 2. Trust property — any type of property may be received by the trust, such as money, land, shares or intellectual property (for example, patent).
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• 3. A trustee — person who is the legal owner and controller of the trust property. Trustee, who is usually appointed in the trust deed, manages the trust on behalf of the beneficiaries and is held accountable-subject to fiduciary duties. • 4. A beneficiary —
Trusts, Associations and Companies: [Class 3]
Read: Ch 3-4 Australian Corporate Law (4th ed, 2013)
LEGT 2741 Anil Hargovan
1
What is a trust?
• ..is an equitable obligation, binding a person (called trustee) to deal with property over which he/she has control (trust property) for the benefit of persons (called beneficiaries) of whom he/she may be one (but not sole), and any one of whom may enforce the obligation. • Note: Trust is not itself a legal entity. See further: Australian Corporate Law (4th ed, 2013) at pp 63-72
LEGT 2741 Anil Hargovan 2
Features of Trusts:
• Formalities (settlor; trustee; the beneficiary; trust property) • Control/management (by trustee) • Liability (personal liability by trustee) • Property (owned by trustee) • Taxation (if trust income is fully distributed, beneficiaries pay tax) • Duration (rule against perpetuities)
LEGT 2741 Anil Hargovan
3
Essential elements: Trust
• 1. Settlor — person who creates the trust by donating or transferring property to the trust. It is not uncommon for the creator to establish a trust with a nominal amount of money (for example, $50) as trust property. Thereafter, settlor no longer has control over the trust property – it legally belongs to the trustee. – Note: a trust can be created in a variety of ways. When trusts are created unintentionally (such as constructive trusts imposed by the court as a result, for example for breach of partner’s or director’s fiduciary duty), the need for a settlor does not arise. • 2. Trust property — any type of property may be received by the trust, such as money, land, shares or intellectual property (for example, patent).
LEGT 2741 Anil Hargovan
4
• 3. A trustee — person who is the legal owner and controller of the trust property. Trustee, who is usually appointed in the trust deed, manages the trust on behalf of the beneficiaries and is held accountable-subject to fiduciary duties. • 4. A beneficiary —