There are a number of technical terms and phrases associated with trusts and wealth planning. Here is a guide to some of the most common.

Trust
A trust is a legal relationship between the person wishing to create a trust (the “Settlor”) and one or more persons willing to undertake the office of trustee (the “Trustee”) whereby certain assets are placed under the control of the trustee upon trust to be held for the benefit of certain persons (the “Beneficiaries”) or for a specified purpose (whether charitable or not). A trust may also be created by a unilaterial declaration of trust made by the settlor. A trust may be created orally, but is more commonly created in writing.

Trust instrument
The document creating a trust that sets out the terms of the trust and the powers of the trustee. This is usually in the form of a deed and is often being referred to as the Deed of Trust, the Deed of Settlement or the Declaration of Trust.

Settlor
The person who creates the trust. Any individual who can freely dispose of the property to be settled in the trust can be a settlor. A corporate body may also be a settlor if it’s authorised by its constitution.

Trustee
The person who is entrusted with property for the benefit of another. A trustee can be an individual or a corporation.

Beneficiary
One who is entitled to receive benefit from a trust under the terms of the trust. All individuals can be beneficiaries of a trust, including unborn persons, minors and persons of unsound mind. A corporate body capable of holding property may also be a beneficiary.

Protector
An individual or corporation whose consent is required, or to whom notice need to be served, before the trustee can carry out certain acts (e.g. the distribution of trust capital). The protector is a common feature in the “offshore” world whose role is usually to oversee the actions of the trustee. The extent of the powers and responsibilities of a protector would be set out in the trust instrument.

Excluded person
The person who is expressly excluded from receiving any benefit, whether directly or indirectly, from the trust. Discretionary trust A trust in which a beneficiary has no absolute current right to direct the trustee to pay him an ascertain part of the trust assets. They are described as discretionary trusts as the ultimate choice as to which beneficiary will eventually enjoy the trust assets is left to the trustee and the beneficiaries have no interest until the discretion is exercised in their favour.

Fixed trust
A trust where the interests of the beneficiaries are set out (fixed) under the terms of the trust instrument. There is little, if any, discretion given to the trustee as the trust instrument will state who are entitled to the trust fund, and in what manner.

Irrevocable trust
A trust which cannot be revoked or cancelled once it is set up and may only be terminated when all trust assets have been distributed or in accordance with the terms as provided in the trust instrument.

Revocable trust
A trust which can be revoked in accordance with the terms as provided in the trust instrument. Upon revocation of the trust, the trust will cease to be of existence and all trust assets will be revested in the settlor.

Perpetuity period
The duration within which all trust assets must be vested with (or distributed to) the beneficiaries in accordance with the terms of the trust. The perpetuity period cannot be longer than the maximum period allowed by the proper law of the trust.

Proper law
The choice of law that governsthe trust as expressed in the trust instrument.

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