For a discretionary trust, if it has personal trustees of say 4 individuals & those 4 individuals are the named beneficiaries of that trust, would that trust be still considered a valid trust, because in the trust deed it would have the standard "other" beneficiaries (father, mother, children, grandparents, etc.) distributions can be made to?
Trustee/Beneficiaries question
- Thread starter thesuperman
- Start date
There's the named beneficiaries which you've indicated there are 4.
There's secondary beneficiaries, which presumably is extended family by blood or marriage, present and future.
All seems fairly standard, why do you think the trust isn't valid?
There's secondary beneficiaries, which presumably is extended family by blood or marriage, present and future.
All seems fairly standard, why do you think the trust isn't valid?
Well, that was just an example of family members being both individual trustees & also named beneficiaries, or let's say it's just 2 people in the family then (eg. husband & wife) that are individual trustees & named beneficiaries in the deed.
Since the deed would state that other potential beneficiaries included all blood relatives as well, then it would be still considered a valid trust & there would be a trust relationship, correct?
Since the deed would state that other potential beneficiaries included all blood relatives as well, then it would be still considered a valid trust & there would be a trust relationship, correct?
Yikes, I missed the point Terry has made. Individual trustees being the same as the named beneficiaries is generally considered a bad idea. A better solution would be to establish a company trustee of which all 4 individuals can be shareholders and directors if appropirate.
Blood relatives, etc, is quite common place. When it comes to lending, serviceability, etc, the lenders tend to look at the history of the distributions, not necessarily who is or isn't specifically listed in the trust deed.
Blood relatives, etc, is quite common place. When it comes to lending, serviceability, etc, the lenders tend to look at the history of the distributions, not necessarily who is or isn't specifically listed in the trust deed.
Let's say that a trust has already been set up where 2 individuals (husband & wife) are individual trustees & also named beneficiaries of a discretionary trust & then an unencumbered investment property has been purchased & settled on already many years ago.
Does that mean no trust legally exists? Even though the discretionary trust has it's own bank accounts, rent goes to that bank account, tax returns for that trust has been done showing the trust owns that investment property & getting rental income, and distributions to only 1 of the named beneficiaries gets a distributed at year end?
Does that mean no trust legally exists? Even though the discretionary trust has it's own bank accounts, rent goes to that bank account, tax returns for that trust has been done showing the trust owns that investment property & getting rental income, and distributions to only 1 of the named beneficiaries gets a distributed at year end?
If there are other potential beneficiaries then it wouldn't fail from that point of view.
The reason why not generally a good idea to have 4 trustees includes:
- difficulty making decisions. All trustee decisions must be unanimous
- difficulty getting 4 people together to sign something
- asset protection as trustees are personally liable for debts of the trust.
So as far as the trust deed has the usual clause of potential beneficiaries of blood relatives, future potential husbands/wives, etc. then the above trust wouldn't fail & still be considered a trust then.
If there are other potential beneficiaries then it wouldn't fail from that point of view.
