Trust Agreement or Trust Deed is an agreement in which one person transfers ones assets to another person (Trustee). In accordance with the terms of this agreement it is possible to transfer money, securities, real estate, personal and intellectual property and other ownership rights.
The essence of this document does not change depending on what name it has, whether it is a Trust Deed, Trust instrument, Trustee Agreement.
As a rule, a Trust Deed takes the form of a contract. This document explains the reasons of transfer of ownership to a Trustee, which is often carried out for purpose of protection of assets.
In the main part of the document the main purpose of the trust is defined, including full description of the assets, terms and conditions of the Trust as well as situations under which the Trust is terminated. There is also information about the powers and responsibilities of a Trustee and provisions that concern their remuneration.
Participants to Trust Deed:
- Settlor – a person who establishes a Trust and transfers his assets for their protection and management to a Trustee. The Settlor and Beneficiary may be the same person.
- Trustee – the second party under the Deed who takes title to the Settlors' assets. He can be an individual as well as a legal entity (i.e. a corporation).
- Beneficiary – the key third party of a Trust Deed. It is a person who is the beneficial owner of the Trust and who is entitled to all benefits, profits from it.
There are obvious advantages of a Trust Deed:
- Control of property;
- Tax benefits;
Please do not hesitate to get in touch with IQ Decision UK lawyers to find out more about the potential benefits of a Trust Deed.
Due to its concept, a Trust Agreement gives Settlor the opportunity to exercise control and management of their wealth using a third party. This agreement provides confidentiality to the ultimate beneficiaries of the Trust, for example, in a corporate case scenario while official shareholders appear on the corporate registrar the true beneficial owner, having established a Trust with the official shareholder, will not be shown in the corporate charter.
There are two types of a Trust:
Revocable Trust. This Trust can be revoked or modified by the Settlor at any time. He is able to modify the terms of a Deed, change the Trustee and Beneficiary of the Trust. Moreover, the Settlor may cancel the trust agreement at his own will.
Irrevocable Trust. Unlike a revocable Trust, this type cannot be modified or revised before expiration of the agreement itself. Termination of the Trust can only be achieved with the consent of the beneficiary.
It is necessary to pay attention to the fact that all provisions of a Trust Agreement always depend on the purposes of the Trust formation. Here are just the basic chapters of this document:
- Definitions. A provision that includes the names of the parties, determines the Settlor and the Trustee of a Trust and recognises the transfer of assets between them. There also may be the terminology that is used in this agreement.
- Preamble. This clause stipulates the purposes of creating a Trust and the ownership rights which is transferred to the Trustee.
- Conditions of Trust Deed. It is important to define the conditions that must be fulfilled to transfer the Settlors' assets to the Trustee; the conditions on the basis of which the Trustee acts; and the conditions that must be fulfilled to distribute the income of the Trust.
- Powers and obligations of the parties. This part determines the powers and responsibilities of the parties hold such as the Settlor and the Trustee.
- Appointment of a new Trustee. It is appropriate to make provision for circumstances under which the Trustee resigns; who may become a new Trustee; and under what conditions.
- Dispute settlement. This part shall describe the applicable law to a Trust Deed and the main method of dispute resolution. Moreover, it shold include the method of peaceful settlement of disputes between the parties. However, if the parties to the agreement cannot reach mutual resolution to a problem, disputes shall be resolved by litigation at the request of one of the parties.
- Confidentiality. This clause protects from the dissemination of confidential information related to the assets and the parties of Trust.
- Duration of Trust Deed. A Trust Agreement shall provide the provision that stipulates duration of the Trust, as well as the conditions for its termination and cancellation.
General provisions such as:
- Force majeure and its consequences;
- Governing law;
- Amendments to an agreement;
- Number of copies of a Trust Agreement and their legal force;
- The effective date of a Trust Deed.
To set up a proper Trust Deed and avoid unnecessary complications in the future address your issues to IQ Decision UK experts who will assist you in establishing a proper Trust tailored to specific needs of the client.