![]() For a trust to be valid it is essential that the final beneficiaries can be identified. If this person is a discretionary beneficiary the beneficiary can only benefit at the trustee’s discretion.Ī final beneficiary is a person who benefits when a trust comes to an end. This means that trust ownership is private information.Ī beneficiary is a person who can benefit from a trust either through receiving capital or income. Registers of property ownership such as the companies office, which records share ownership, and Land Information New Zealand, which records property ownership, are not permitted to show that the owner of property is a trustee. The trustee is the legal owner of the trust property and the legal “face” of the property. The Settlor can also elect a person, who can be the settlor or someone else, who can add and remove trustees and or beneficiaries. These rules are recorded in a document called the deed of trust. This person chooses the initial trustee or trustees, decided who will benefit from the trust and what the trust rules will be. The settlor is the person who settles the trust. That means that a trust that only owns a family home does not need to register with Inland Revenue. A trust is only required to register with Inland Revenue if the trustee earns income. There is no register of discretionary family trusts. The subject matter being considered here is that of a discretionary beneficiary with nothing more than a right to be considered, which is also referred to as an expectancy.Ī reference to a trust is a generic reference to both property owned by the trust and the complex relationships that comprise a trust. The same is the case where a beneficiary is the final beneficiary of a discretionary trust where a named beneficiary might be entitled to share equally in the trust’s remaining property at the end of the trust. Where a trust is a will trust, or a “fixed trust” that provides for beneficiaries to have pre-determined interests in property, for example income for life on $500,000 or my house at 2 Glebe Street the beneficiary’s rights are related to that property interest and as such are stronger and easier to establish and enforce. It is also important to appreciate that the information provided here is in the context of a discretionary beneficiary who has no fixed rights, other than a right to be considered. It is for this reason any dealings with a trust are with the trustees not the beneficiaries. The message you need to take from this chapter is that trusts, unlike companies, are not legal entities. ![]() Even the experts can’t agree as to exactly what a trust is! If you find this a bit heavy ready, don’t worry. While the trust’s assets are held for the sole benefit of the beneficiaries which beneficiaries can benefit, and to what extent is determined at the trustee’s sole discretion.Īlthough the trustee is the owner of the trust property at law, the trustee can only act for the benefit of the beneficiaries.Įven though the trustee cannot benefit from the trust the trustee is accountable to the beneficiaries for any loss. It is from these obligations that the beneficiaries derive their rights. The existence of these obligations are fundamental to a valid trust. Most importantly, as well as owning the property, the trustee also owes certain obligations to the beneficiaries. However, the trustee cannot benefit from the property (unless the trustee is also a beneficiary). The trustee is the legal owner of the property subject to the trust. However, it is widely accepted that in its simplest form a trust is property that is owned by a trustee for the benefit of a beneficiary or beneficiaries. There is no legal or singularly accepted definition of what a trust is. To understand what it is to be a beneficiary, it is necessary to have an understanding of what a trust is. The purpose of this commentary is to provide a simply written and easy to understand explanation of what it is to be a beneficiary of a discretionary trust and what rights a beneficiary has in respect of a discretionary trust. ![]() However, the majority of people who can benefit from these trusts either do not know about the trust, or about their rights in respect of the trusts. These trusts control assets worth billions of dollars. It is generally accepted that New Zealand has more formally settled discretionary trusts per head of capita than anywhere else in the world. ![]()
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