Glossary of Trust Terms

Glossary of trust terms

You may hear or read the following phrases, all or some of which, may be unfamiliar:

• Settlor – the person who provides the property to be held on trust
• Trustee – the persons charged with responsibility for managing the trust property, whether an individual, or individuals, or a corporate entity. These are usually appointed in the trust document.
• Beneficiaries – those who may benefit from the trust.
• Fixed trust – a trust which is set up during lifetime which allows the person setting up the trust to control money and assets and leave little or no discretion as to how to distribute the assets of the trust.
• Express trust – a trust which is expressly set out in writing
• Implied trust – either resulting or constructive trust
• Resulting trust – a trust which arises through an operation of law, such that the trust property is held for the original settlor. These can arise in different circumstances, for example where an intended trust fails because the beneficiaries were too uncertain, but the property transfer has already been made by settlor to trustees.
• Constructive trust – these tend to arise as an equitable remedy of the Courts especially in circumstances of unjust enrichment.
• Life interest trust – in essence these confer a benefit or right to the income or use of the trust property by a beneficiary during their lifetime, but not the consumption of the trust property.
• Discretionary trust – a trust wherein the property is held by the trustees for the beneficiaries and the trustees have the power to decide how to apply the trust funds or decide that they may not apply them at all. Capital and income may often be applied for the beneficiaries if the trustees determine that is right, if the trust deed allows them to do so.
• Relevant Property Trust – trusts subject to principal and proportionate charges on Trust capital. Broadly, most Life Interest Trusts created after March 2006 and all Discretionary Trusts are relevant property trusts.
• Principal Charges – also referred to as the Trust’s ten-year anniversary charge. An IHT charge up to a maximum of 6% on the Trust’s capital value at the date of each 10-year anniversary
• Proportionate Charges – also referred to as exit charges. An IHT charge on the value of capital “exiting” the Trust.