Trust solutions

A trust is a fiduciary arrangement in which an appointed trustee holds property for the benefit of others. Trusts are commonly used for private estates, pension funds, mutual funds, and charities. Their primary purpose is to protect and manage assets for beneficiaries and, in the case of private estates, to ensure their transfer to future generations.

A fiduciary is responsible for acting in the best interests of another party. Examples of fiduciary relationships include lawyers/clients, doctors/patients, and parents/children. Trustees, as fiduciaries, manage and make decisions about trust assets for the beneficiaries. They must not act for personal gain without the beneficiaries' informed consent or explicit permission from the trust instrument – a legally binding document that defines how the trust will be managed.

Succession planning concerns the transfer of wealth either vertically – from one generation down to another – or horizontally – within the same generation. In the context of trusts, this determines how and when beneficiaries benefit from trust assets. Trusts may facilitate a smooth transition of assets and may avoid the complexity, expense and potentially public nature of probate.

There are different types of trust:

1. Fixed trusts: beneficiaries receive fixed shares of the trust assets upon a predetermined event.
2. Discretionary trusts: trustees decide how and when to distribute the trust assets, guided by the settlor's wishes.
3. Revocable trusts: the settlor can alter or revoke the trust.
4. Irrevocable trusts: once established, the trust cannot be changed or dissolved.

Trustees have a duty to invest, unless this is explicitly exempted by the terms of the trust. They must avoid speculative investments and maintain a balanced, diversified portfolio.
If settlors prefer greater control, they may retain their investment powers whilst appointing others to manage the investments.