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Settlors often have power to add beneficiaries and they may, for example, decide to add members from the wider family or a charity. Final or ultimate beneficiaries have a legal right to the trust property on the date the trust finishes. In simple terms, a family trust cannot exist for longer than 80 years and the trust deed must set a date on which the trust has to finish.

This is known as the date of distribution. Trustees are usually given the power to bring the trust to an end before the date of distribution. Some trust deeds give trustees a power to extend the distribution date so long as it does not go beyond 80 years.

The trust deed usually gives someone the power to appoint new trustees and sometimes the power to remove trustees. Usually this power is given to the settlor. If the trust deed does not mention this, the trustees together can appoint new trustees.

If they cannot agree, the Court has the power to appoint new trustee s. Trustees are the owners of the property and can do the same sorts of things with the property that owners can do. They can hold property, raise mortgages, hold bank accounts and generally hold all types of assets and investments as long as it operates according to the powers set out in the trust deed.

Assets can be transferred into trust at any time. They can be gifted into trust or sold into trust. The settlor will usually transfer the assets into trust, or the trustees may acquire the assets from someone else. Before gift duty was repealed it was common for settlors to sell the assets to the trustees. If there were no funds in trust to pay for the asset, the trustees signed a document acknowledging that they owed the settlor the purchase price.

That sum was the maximum amount that could be gifted without incurring gift duty. The debt was an asset owned by the settlor. Any increase in the value of the asset sold to the trust belongs to the trust and not to the settlor personally. Similarly, any income from the trust assets is usually trust income and not the income of the settlor. The repeal of gift duty in October means that assets of any value can be transferred into trust after that date without incurring gift duty.

Generally, the trustees decide which payments from income or capital are to be made from the trust and which beneficiaries shall receive them. In addition, if the trustees owe a debt, the creditor can demand payment of any part of the debt, if the document recording the debt allows such demands to be made.

If the debt for the initial purchase of assets is repayable to the settlor on demand, the settlor can require payment of all or any part of this debt at any time. Payments of this kind from the trust to the settlor may be free from income tax.

Generally, income will either be taxed in the hands of the trustees as trustee income or in the hands of the beneficiary if the trustees decide to pay income to beneficiaries. The structure of a trust will depend on what the settlor specifically wants the trust to do. It is important to note that trustees, once appointed, cannot do just anything they want with the trust property.

They have powers that allow them to do certain things and duties that must be observed. If you wish to set up a trust, it is important that you understand your trust and what trustees can and cannot do before you establish it.

You should talk to a lawyer to ensure that the terms of your trust fully meet your needs, fulfil the intended purpose and will not be upset by any clawback provisions. One alternative, used when each spouse wants as much protection as possible over one or more assets without the direct involvement of their spouse as a co-trustee or beneficiary, is a cross or mirror trust or a parallel trust.

This involves setting up two trusts instead of one. For example, the first spouse can establish a family trust with the second spouse, children and grandchildren as the beneficiaries. The second spouse also establishes a family trust with the first spouse, children and grandchildren as beneficiaries.

Or get Make Your Own Living Trust , by Denis Clifford Nolo which explains how to create a trust, transfer property to the trust, and amend or revoke the trust at any time. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service.

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A living trust is an excellent way to avoid probate. But do you really need one? Start Your Will Today! Avoiding Probate With a Living Trust Probate is the legal process that inventories and distributes a person's property after death.

Drawbacks to Living Trusts Living trusts do have a downside. Is a Living Trust Right for You? To decide if you need a living trust, consider these factors: How Old Are You?

How Rich Are You? Are You Married? Next Steps If you determine that you would benefit from having a living trust, you can make one today with Nolo's Online Living Trust.

Ready to create your will? Talk to a Lawyer Need a lawyer? Living trusts also avoid conservatorships, they say, because if you become disabled, a trustee is already in place to manage your trust assets for you. Most of these salespeople are honest. Few will tell you an outright lie. Not all living trusts are scams.

They are useful and important tools in estate and tax planning, when used wisely and considerately. The most important reasons for having a living trust include:. Every trust must have four elements: There must be someone who creates the trust, who is often called the "trustor" or the "grantor. The person for whose benefit the trust is created is called the "beneficiary.

Why do people create living trusts? It goes quickly, is private for the most part, and does not cost much money. Living trusts can be and are contested, just like a will. Administering a living trust after your death is not cost-free. Even if probate is avoided, the successor trustee should usually seek help from a lawyer in making sure that your debts are paid, all of the necessary tax forms filed and the assets in your trust legally distributed to your beneficiaries.

After your death, your living trust will not cut off the claims of your creditors against the trust corpus. For that reason, the successor trustee will often open a probate estate anyway, to require your creditors to file claims within the time required by law or be barred from collecting their claims against your estate. Living trusts are much more expensive to set up and maintain than a will.

Probate can often be avoided without using a living trust, by setting up "payable on death" accounts, making beneficiary designations, holding assets jointly, etc. In many instances, the trustor has failed to transfer all of his "probate assets" to his living trust.