What is a Trust?

A trust is a contractual relationship or device, which can be created either by will (a testamentary trust) which becomes operative on the death of the testator or testatrix, or by an inter vivos trust during one's lifetime (which is active).

An inter vivos trust is generally created in one of two ways. Firstly, a person known as the "Settlor'' or "Donor" (in the U.S. as the "Grantor") wishing to create a trust  transfers the ownership of property to another person (the "Trustee") with the intention that the property be held in trust (referred to as a 'settled trust') for another person (the "Beneficiary").

Secondly, a trust may also be created unilaterally whereby a person, already holding certain property, declares himself or herself to be a trustee of such property (a 'declaratory trust'). Both these types of inter vivos trusts are generally created or evidenced by a written document referred to as a "trust deed" or "trust instrument". The purpose of this is to clearly set out the terms under which the trust is administered.

The principal components to a Trust are:

• A Settlor or Grantor
• One or more Trustees
• A Trust Fund
• One or more Beneficiaries

There is often an additional component called a Protector. A Protector is a person appointed by a Settlor to whom the Trustee can look for advice in relation to distribution and administration of the Trust Fund. Usually, a Protector is a trusted confidant of the Settlor who will be able to advise the Trustee as to the proper course of action, or as to the wishes of the Settlor during his lifetime or after his death. The Protector may be given powers in the Trust Deed to veto certain Trustee's decisions, for example in relation to the duration of the Trust, addition or removal of Beneficiaries, removal and appointment of Trustees and distributions.