Who is the Principal of a trust?

[rodimus]

I am trying to set up a HD Trust.

Am using my company as trustee.
One thing I dont really understand,
1) What does the 'Principal' do? Who is it usually?

2)And If i want my trustee company to be one of the beneficiaries, do I have to state that or is it already included in there?
What about my mum, dad and family's name, do i have to write each of them in the beneficiaries - or are they already covered?

3) Do I have to nominate a special income unitholder at this stage? Is this normally a person with the highest income(me) or can it be a company (the trustee)?

4)If 2 appointors are nominated, when a decision has to be made, do both of them have to make the decision together, or just 1?

thanks

 

[rodimus]

WHat about the Unit Value for the unit component?

How is that determined? since the trust only has $10 from the settlor at the initial stage.

 

[Puppeteer]

Hi Rodimus,

I'm still fairly new to trusts, having only set mine up yesterday, so don't take this as gospel.

But here's the definitions for you

Principal means the person described as such in the schedule to this deed and, on that person't death, in relation to any powers contained herein exercisable with the consent of the Principa, means that person't legal representative.

The principal should be you because he has powers over the trustee in some cases. For example, the Trustee needs the permission of the Principal if the Trustee wants to change the trust deed. Basically the principal needs to be consulted before the trustee can do some things.

I think that the principal is basically the beneficiary for whom the trust was set up for.

I'm not sure if the trustee company can be a beneficiary (though company's generally can be), but if your deed allows it, then the trustee can be paid reasonable professional expenses for being the trustee. It's probably a way around being a beneficiary in most cases.

I don't think you need to nominate unit holders until the trust actually recieves an investment from an invetor. The Income unit holders are usually your beneficiaries.

My trust only has one appointor. Having more than one could be tricky. The appointor can however appoint others to act as appointors when they want.

You can determine your own unit value. Mine has a single unit for the $10 settlement sum at the moment, though I'll probably end up with $1 units, just because it's easy to relate units to the capital.

 

[NigelW]

Rodimus see responses in CAPS

I am trying to set up a HD Trust. GET SOME PROFESSIONAL ASSISTANCE

Am using my company as trustee. OKAY AS LONG AS IT DOESN'T ALSO RUN YOUR BUSINESS
One thing I dont really understand,
1) What does the 'Principal' do? Who is it usually? JUST THE PRIMARY BENEFICIARY IE IT'S PROBABLY YOU. IT'S A POINT OF REFERENCE TO DESCRIBE OTHER BENEFICIARIES BY THEIR RELATIONSHIP TO YOU. BUT REMEMBER THAT THE TERM "PRINCIPAL" WILL BE DEFINED IN THE TRUST DEED SO IT MEANS WHAT THE DEED SAYS IT MEANS.

2)And If i want my trustee company to be one of the beneficiaries, do I have to state that or is it already included in there? AGAIN, DEPENDS WHAT THE TRUST DEED SAYS, BUT USUALLY THE ANSWER IS "NO" BECAUSE IT WILL INCLUDE "ANY COMPANY OF WHICH A BENEFICIARY IS A DIRECTOR" AND THIS WOULD INCLUDE THE TRUSTEE. REMEMBER THAT THE TRUSTEE COMPANY CAN'T BE THE SOLE BENEFICIARY AS WELL AS TRUSTEE BUT THAT'S UNLIKELY TO BE A PROBLEM WITH A WELL DRAFTED DEED.
What about my mum, dad and family's name, do i have to write each of them in the beneficiaries - or are they already covered? AGAIN, SUBJECT TO WHAT THE DEED DEFINES AS THE "BENEFICIARIES" TYPICALLY NOT AS THEY WILL BE GENERICALLY DESCRIBED BY REFERENCE TO YOU IE "ANY PARENT, GRANDPARENT, CHILD OR GRANDCHILD OF THE PRINCIPAL BENEFICIARY"...

3) Do I have to nominate a special income unitholder at this stage? Is this normally a person with the highest income(me) or can it be a company (the trustee)?
PROBABLY NOT. THE WAY BETTER HDT'S ARE DRAFTED THEY JUST OPERATE LIKE AN ORDINARY DISCRETIONARY TRUST UNTIL YOU DECIDE TO ISSUE UNITS, WHICH YOU DO ONLY WHEN YOU'VE GOT AN INVESTMENT IN MIND AND WANT TO SEED THE TRUST IN A TAX EFFECTIVE WAY FOR YOU.
4)If 2 appointors are nominated, when a decision has to be made, do both of them have to make the decision together, or just 1? DEPENDS HOW THE TRUST DEED SAYS THEY MUST MAKE THEIR DECISIONS...

thanks

Hope that helps.

Cheers
N.