
Trusts
The nature of a trust depends largely on when it is created, the rights given to its beneficiaries, and the purpose for which they are created.
Business trusts are inter vivos trusts which are set up during a founder’s lifetime to conduct business and generate profits. Such an entity can afford certain protections and advantages that other business entities do not, therefore, it is imperative that the trust deed is set up correctly. In the structure of a business trust the trustees use the assets in the trust to carry on their business and produce a profit for the benefit of the trust’s beneficiaries. The assets held in a business trust are protected from the trustee’s and founder’s creditors, and therefore this type of trust can be more secured and cost-effective to administer than other business entities.
Depending on the intention of the founder, any of the above-mentioned trusts can be set up as either a vesting trust or a discretionary trust. In a vesting trust, the beneficiaries and their benefits are clearly defined in terms of the trust deed and the trustees have the duty to follow these specific instructions. On the other hand, in a discretionary trust, the trustees are empowered to use their discretion to make certain decisions such as the amount and timing of distributions to beneficiaries. The Trustees could also potentially decide who can and will benefit from the trust.