Trusts

Trusts are a complicated area of the law, but there are essentially the following two types of trust.

When an individual settles a property upon trust he may wish to determine the precise extent to which his chosen beneficiaries are to enjoy the settled property in the future. He may for example divide their enjoyment of the property by creating successive interests or he may prevent beneficiaries from obtaining access to the capital before a certain age by giving them contingent interests.

Allowance may be made for future generations by describing the beneficiaries rather than naming them provided that the description is sufficiently clear to enable the beneficiaries to be identified with certainty.

Each beneficiary has a bundle of rights resembling an interest in property which he may sell or give away.

Where the individual does not wish to determine in advance the precise extent of each beneficiary's entitlement, he may nominate a category of beneficiaries and give his trustees the power to determine how much (if anything) each potential beneficiary should receive.

The trustees' discretion may simply concern the distribution of income. The individual may widen the trustees' discretion to allow them to retain (or accumulate) the income if they think fit.

A discretion over the distribution of income may be combined with fixed interest in capital.

Alternatively the trustees' discretion may extend to capital as well as income, giving the trustees the power to distribute capital to one or more of the designated class of beneficiaries at any time.

The beneficiary under a discretionary trust cannot claim any property as of right. He has only the hope that the trustees will exercise their discretion in his favour.