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Are you interested in starting a trust to hold and protect your business’ assets? Setting up a trust can be a complex matter and involve a range of steps and documents. One such document is a trust deed. This article will outline:

  • what a trust deed is; and
  • the three key purposes of a trust deed. 

Purpose of Trust Deeds

A trust is a mechanism through which your business can put aside and protect its property and assets. These assets are known as the trust property. To form a trust, you will have to prepare and sign a trust deed. This legal document has three primary functions; to:

  • establish who are the key individuals involved in your trust; 
  • delegate certain rights and obligations to the individuals involved in your trust; and
  • outline what the trust property is and what should be done with these assets. 

The Roles of Individuals Involved

A trust deed specifies who the key individuals are that make up your trust. A trust has to have a:

  • settlor; 
  • trustee; and 
  • beneficiary, or multiple beneficiaries. 

The Settlor

The settlor is the individual who wants to establish the trust. If you are setting up a trust on behalf of or for your business, you will be the settlor. The trust deed will:

  • specify that you are the settlor of the trust;
  • include your details, such as your full legal name; and
  • affirm that you own the assets being placed in the trust and have the legal capacity to dispose of this trust property or place these assets in the trust. 

The Trustee

The trustee is the individual who administers the trust and the trust’s affairs. The trustee will own the trust property but hold it on the behalf of, and for the benefit of, the beneficiary or beneficiaries. The trust deed will:

  • specify who the trustee or trustees are; and
  • outline the rights, obligations and powers of the trustees. 

Your business will have to appoint a trustee or trustees before you draft your business’ trust deed.

The Beneficiary 

The beneficiary or beneficiaries are the individuals who will receive the benefit of the trust and ultimately receive the trust property. If you are establishing a trust for your business’ assets, the beneficiaries will be your business and the family members of your business partners. The trust deed will:

  • specify who the beneficiaries are; and
  • outline what trust property or assets they will ultimately receive. 

The Parties’ Rights and Obligations

A trust deed will include a clause that specifies the rights, obligations and powers of the individuals involved in the trust, specifically the trustee or trustees. 

The powers and rights of your trustees will likely include the:

  • legal control of the trust property;
  • right to hold the title to this trust property in their own name; and
  • power to deal with this trust property as they see fit, on the condition that this conduct is in accordance with the deed.

The obligations of your trustees will likely include to:

  • know of and abide by the terms; 
  • stand in a fiduciary relationship to your beneficiary. This relationship requires trustees to act in good faith and in the best interests of the beneficiaries and your business;
  • not delegate their duties to another individual unless they require specialist advice or knowledge. For example, a trustee is entitled to receive legal advice to ensure that they are acting in good faith towards your business; and
  • keep their beneficiaries informed of their actions. 

The Trust Property

A trust deed will also outline:

  • what the trust property is. It is crucial that you address each of the assets you are placing in the trust in detail; and
  • what your trustees should do with the trust property. For example, you may wish to specify that your trustees should invest your trust funds and assets in a manner that is in the best interests of your business. You should also specify the period of time that your trustees should maintain ownership of your assets for.

You must articulate in the trust deed any steps you wish for your trustees to take regarding your trust property. 

Key Takeaways

If you wish to set up a trust to hold your business’ assets and property, you will need to draft a trust deed. A trust deed is the legal document that creates your trust. The purpose of this document is to:

  • specify who the settlor, trustees and beneficiaries are;
  • outline the powers, rights and obligations of your trust’s trustees; and 
  • detail what the trust property is and what your trustee should do with these assets and resources. 

If you require assistance with executing a trust deed, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is a trust deed?

It is a legal document that creates and governs a trust. The document will specify who the settlor, trustees and beneficiaries are, detail what the trust property is, and will outline the rights and obligations of the trustees.

Is a trust deed legally binding?

If executed properly, a trust deed is legally binding.

What is the purpose of a trust deed?

The purpose is to specify who the settlor, trustees and beneficiaries of the trust are, outline the powers, rights and obligations of the trust’s trustees and detail what the trust property is and what the trustees should do with these assets and resources. 

What is a trust for?

Trust can be for a charitable purpose, commercial in nature, by holding and protecting a business’s assets and property or a family trust that holds assets for a particular family.

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