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General concept relating to trusts for Legal Aspects Of Business Mcom Sem 2 Delhi University Notes

General concept relating to trusts for Legal Aspects Of Business Mcom Sem 2 Delhi University : Here we provide direct download links for International Pricing Process And Policies For International Marketing MCOM Sem 3 Delhi University notes in pdf format. Download these International Pricing Process And Policies For International Marketing MCOM Sem 3 Delhi University Complete notes in pdf format and read well.

General concept relating to trusts for Legal Aspects Of Business Mcom Sem 2 Delhi University Notes

General concept relating to trusts for Legal Aspects Of Business MCOM Sem 2 Delhi University :  A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor; transfers (“settles”) a property (often but not necessarily a sum of money) upon the second party (the trustee) for the benefit of the third party, the beneficiary. At least two of the three parties must be different individuals or business entities; that is, one person can be trustor and trustee, and another can be the beneficiary or one can be trustor and beneficiary, and another be trustee or one person can be trustor and another can be trustee and beneficiary.

A testamentary trust is created by a will and arises after the death of the settlor. An inter vivos trust is created during the settlor’s lifetime by a trust instrument. A trust may be revocable or irrevocable; in the United States, a trust is presumed to be irrevocable unless the instrument or will creating it states it is revocable, except in California, Oklahoma and Texas, in which trusts are presumed to be revocable until the instrument or will creating them states they are irrevocable. An irrevocable trust can be “broken” (revoked) only by a judicial proceeding.

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General concept relating to trusts for Legal Aspects Of Business Mcom Sem 2 Delhi University Notes

General concept relating to trusts for Legal Aspects Of Business MCOM Sem 2 Delhi University :  A trust is created by a settlor, who transfers title to some or all of his or her property to a trustee, who then holds title to that property in trust for the benefit of the beneficiaries. The trust is governed by the terms under which it was created. In most jurisdictions, this requires a contractual trust agreement or deed. It is possible for a single individual to assume the role of more than one of these parties, and for multiple individuals to share a single role. For example, in a living trust it is common for the grantor to be both a trustee and a lifetime beneficiary while naming other contingent beneficiaries.

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Trusts have existed since Roman times and have become one of the most important innovations in property law. Trust law has evolved through court rulings differently in different states, so statements in this article are generalizations, understanding the jurisdiction-specific case law involved is tricky. Some U.S. States are adapting the Uniform Trust Code to codify and harmonize their trust laws, but state-specific variations still remain.

Trusts and similar relationships have existed since Roman times.

General concept relating to trusts for Legal Aspects Of Business MCOM Sem 2 Delhi University : The trustee is the legal owner of the property in trust, as fiduciary for the beneficiary or beneficiaries who is/are the equitable owner(s) of the trust property. Trustees thus have a fiduciary duty to manage the trust to the benefit of the equitable owners. They must provide a regular accounting of trust income and expenditures. Trustees may be compensated and be reimbursed their expenses. A court of competent jurisdiction can remove a trustee who breaches his/her fiduciary duty. Some breaches of fiduciary duty can be charged and tried as criminal offences in a court of law.

A trustee can be a natural person, a business entity or a public body. A trust itself is a distinct entity from its trustee and, in the United States, is subject to federal and state taxation. Trusts can be incorporated or formed into limited liability companies, with the business entity acting as both trustor and trustee.

General concept relating to trusts for Legal Aspects Of Business Mcom Sem 2 Delhi University Notes

General concept relating to trusts for Legal Aspects Of Business MCOM Sem 2 Delhi University : Property of any sort may be held in a trust. The uses of trusts are many and varied, for both personal and commercial reasons, and trusts may provide benefits in estate planning, asset protection, and taxes. Living trusts may be created during a person’s life (through the drafting of a trust instrument) or after death in a will.

In a relevant sense, a trust can be viewed as a generic form of a corporation where the settlors (investors) are also the beneficiaries. This is particularly evident in the Delaware business trust, which could theoretically, with the language in the “governing instrument”, be organized as a cooperative corporation or a limited liability corporation,:475–6although traditionally the Massachusetts business trust has been commonly used in the US. One of the most significant aspects of trusts is the ability to partition and shield assets from the trustee, multiple beneficiaries, and their respective creditors (particularly the trustee’s creditors), making it “bankruptcy remote”, and leading to its use in pensions, mutual funds, and asset securitization as well protection of individual spendthrifts through the spendthrift trust.

Basic principles

Terminology

Chart of a trust

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  • Appointer: This is the person who can appoint a new trustee or remove an existing one. This person is usually mentioned in the trust deed.
  • Appointment: In trust law, “appointment” often has its everyday meaning. It is common to talk of “the appointment of a trustee”, for example. However, “appointment” also has a technical trust law meaning, either:
    • the act of appointing (i.e. giving) an asset from the trust to a beneficiary (usually where there is some choice in the matter—such as in a discretionary trust); or
    • the name of the document which gives effect to the appointment.
The trustee’s right to do this, where it exists, is called a power of appointment. Sometimes, a power of appointment is given to someone other than the trustee, such as the settlor, the protector, or a beneficiary.
  • As Trustee For (ATF): This is the legal term used to imply that an entity is acting as a trustee.
  • Beneficiary: A beneficiary is anyone who receives benefits from any assets the trust owns.
  • In Its Own Capacity (IIOC): This term refers to the fact that the trustee is acting on its own behalf.
  • Protector: A protector may be appointed in an express, inter vivos trust, as a person who has some control over the trustee—usually including a power to dismiss the trustee and appoint another. The legal status of a protector is the subject of some debate. No-one doubts that a trustee has fiduciary responsibilities. If a protector also has fiduciary responsibilities, then the courts—if asked by beneficiaries—could order him or her to act in the way the court decrees. However, a protector is unnecessary to the nature of a trust—many trusts can and do operate without one. Also, protectors are comparatively new, while the nature of trusts has been established over hundreds of years. It is therefore thought by some that protectors have fiduciary duties, and by others that they do not. The case law has not yet established this point.
  • Settlor(s): This is the person (or persons) who creates the trust. Grantor(s) is a common synonym.
  • Terms of the Trust means the settlor’s wishes expressed in the Trust Instrument.
  • Trust deed: A trust deed is a legal document that defines the trust such as the trustee, beneficiaries, settlor and appointer, and the terms and conditions of the agreement.
  • Trust distributions: A trust distribution is any income or asset that is given out to the beneficiaries of the trust.
  • Trustee: A person (either an individual, a corporation or more than one of either) who administers a trust. A trustee is considered a fiduciary and owes the highest duty under the law to protect trust assets from unreasonable loss for the trust’s beneficiaries.

Creation

General concept relating to trusts for Legal Aspects Of Business MCOM Sem 2 Delhi University : Trusts may be created by the expressed intentions of the settlor (express trusts)[10] or they may be created by operation of law known as implied trusts. An implied trust is one created by a court of equity because of acts or situations of the parties. Implied trusts are divided into two categories: resulting and constructive. A resulting trust is implied by the law to work out the presumed intentions of the parties, but it does not take into consideration their expressed intent. A constructive trust is a trust implied by law to work out justice between the parties, regardless of their intentions.

Typically a trust can be created in the following ways:

  1. a written trust instrument created by the settlor and signed by both the settlor and the trustees (often referred to as an inter vivos or living trust);
  2. an oral declaration;
  3. the will of a decedent, usually called a testamentary trust; or
  4. a court order (for example in family proceedings).

In some jurisdictions certain types of assets may not be the subject of a trust without a written document.

Formalities

Generally, a trust requires three certainties, as determined in Knight v Knight:

  1. Intention. There must be a clear intention to create a trust(Re Adams and the Kensington Vestry)
  2. Subject Matter. The property subject to the trust must be clearly identified (Palmer v Simmonds). One may not, for example state, settle “the majority of my estate”, as the precise extent cannot be ascertained. Trust property may be any form of specific property, be it real or personal, tangible or intangible. It is often, for example, real estate, shares or cash.
  3. Objects. The beneficiaries of the trust must be clearly identified, or at least be ascertainable (Re Hain’s Settlement). In the case of discretionary trusts, where the trustees have power to decide who the beneficiaries will be, the settlor must have described a clear class of beneficiaries (McPhail v Doulton). Beneficiaries may include people not born at the date of the trust (for example, “my future grandchildren”). Alternatively, the object of a trust could be a charitable purpose rather than specific beneficiaries.

Trustees

General concept relating to trusts for Legal Aspects Of Business MCOM Sem 2 Delhi University : A trust may have multiple trustees, and these trustees are the legal owners of the trust’s property, but have a fiduciary duty to beneficiaries and various duties, such as a duty of care and a duty to inform. If trustees do not adhere to these duties, they may be removed through a legal action. The trustee may be either a person or a legal entity such as a company, but typically the trust itself is not an entity and any lawsuit must be against the trustees. A trustee has many rights and responsibilities which vary based on the jurisdiction and trust instrument. If a trust lacks a trustee, a court may appoint a trustee.

The trustees administer the affairs attendant to the trust. The trust’s affairs may include prudently investing the assets of the trust, accounting for and reporting periodically to the beneficiaries, filing required tax returns and other duties. In some cases dependent upon the trust instrument, the trustees must make discretionary decisions as to whether beneficiaries should receive trust assets for their benefit. A trustee may be held personally liable for problems, although fiduciary liability insurance similar to directors and officers liability insurance can be purchased. For example, a trustee could be liable if assets are not properly invested. In addition, a trustee may be liable to its beneficiaries even where the trust has made a profit but consent has not been given. However, in the United States, similar to directors and officers, an exculpatory clause may minimize liability; although this was previously held to be against public policy, this position has changed.

In the United States, the Uniform Trust Code provides for reasonable compensation and reimbursement for trustees subject to review by courts, although trustees may be unpaid. Commercial banks acting as trustees typically charge about 1% of assets under management.

Beneficiaries

General concept relating to trusts for Legal Aspects Of Business MCOM Sem 2 Delhi University : The beneficiaries are beneficial (or equitable) owners of the trust property. Either immediately or eventually, the beneficiaries will receive income from the trust property, or they will receive the property itself. The extent of a beneficiary’s interest depends on the wording of the trust document. One beneficiary may be entitled to income (for example, interest from a bank account), whereas another may be entitled to the entirety of the trust property when he attains the age of twenty-five years. The settlor has much discretion when creating the trust, subject to some limitations imposed by law.

The beneficiaries are jocosely known as “trust fund babies” or “trustafarians”.

General concept relating to trusts for Legal Aspects Of Business Mcom Sem 2 Delhi University Notes

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