This is the second in a fortnightly series of articles in which we will try to explain family trusts and trading trusts.
Sunday, March 20th 2005, 5:36AM
by The Landlord
Our first article described the history of trusts and gave a brief overview of how they are used in New Zealand.
Here, we describe the various parties to a trust and, in particular, the responsibilities of the settlor, trustees and beneficiaries of a family trust:
The Settlor
This is the person who sets up the family trust.
It is common for a husband and wife to both be settlors of a new family trust.
The settlor will typically be the person who owns the property that will be transferred into the trust.
It is the settlor who sets out in the trust deed who will be responsible for the assets of the trust (trustees) and who will be eligible to receive any benefit from the trust (beneficiaries).
Settlors will usually (but not always) appoint themselves as a trustee and also as a beneficiary of the family trust.
A settlor must have a genuine reason for setting up a family trust. He or she must sign a carefully written trust deed (usually drawn up with the help of a trust expert) and must appoint the trustee(s).
A settlor cannot be the sole beneficiary of the family trust. If he or she was, then a court would surely deem that no actual trust exists.
