Parties to a discretionary trust deed

Settlor

The settlor:

• • provides the initial settled sum to establish the trust;
• • has no other role;
• • must not be a beneficiary; and
• • must not gift or transfer any other property to the trust.

Trustee

The trustee:

• • is the legal owner of the trust assets;
• • is bound by the trust deed;
• • is subject to the relevant state or territory trustee legislation;
• • holds the assets for the beneficiaries; and
• • can be an individual or a corporation.

A corporate trustee has the following advantages:

• • it continues to exist despite the death of any person;
• • it has limited liability (subject to certain exceptions such as s 197 of the Corporations Act 2001 (Cth)); and
• • it removes individuals from direct control of the trust property.

Appointor

The appointor:

• • can generally remove the trustee and appoint a new trustee;
• • generally must be consulted before major decisions are made by the trustee; and
• • is sometimes called “the guardian”, or the “the protector”, or may have division of powers with such persons; and
• • exercises at least some degree of indirect control over the trust.

Beneficiaries

Beneficiaries of a discretionary trust:

• • are for a family discretionary trust generally defined as widely as possible within a family group;
• • generally include corporations and other trusts connected to individual beneficiaries; and
• • have no proprietary interest in the assets of the trust generally or in any individual trust asset.

See Parties to a discretionary trust deed.

Standard discretionary trust clauses

Powers and duties of trustees are found in:

• • the general law relating to trusts;
• • the various state and territory trustee legislation; and
• • the trust instrument.

Many discretionary trusts have a similar structure. Some of the more important aspects of the trust deed are:

• • definitions, including in particular:
• • ◦ the vesting date;
• • ◦ the beneficiaries;
• • ◦ the trust assets;
• • ◦ income; and
• • ◦ income categories;
• • the formal declaration of the trust;
• • the duration of the trust and the ability to appoint an earlier date;
• • power to distribute income;
• • power to distribute capital;
• • power to stream income and capital gains;
• • power to deal with the trust assets, including investment, carrying on business, raising capital, etc;
• • mechanisms for appointment and removal of trustees;
• • powers of the appointor;
• • the right of indemnity of the trustee against the trust assets; and
• • power to amend the trust deed.

See Standard discretionary trust clauses.