I put my brother in charge of bank account to give money to both himself and my son until my son turns 25, at which time they evenly split the money. Who is the legal and equitable owner and why?
What is the nature of right vested in my brother and my son?
Answers
Answer:
Explanation:Beneficiary Rights
It is generally accepted that New Zealand has more formally settled discretionary trusts per head of capita than anywhere else in the world. These trusts control assets worth billions of dollars. However, the majority of people who can benefit from these trusts either do not know about the trust, or about their rights in respect of the trusts.
The purpose of this commentary is to provide a simply written and easy to understand explanation of what it is to be a beneficiary of a discretionary trust and what rights a beneficiary has in respect of a discretionary trust.
To understand what it is to be a beneficiary, it is necessary to have an understanding of what a trust is.
What is a trust?
There is no legal or singularly accepted definition of what a trust is.
However, it is widely accepted that in its simplest form a trust is property that is owned by a trustee for the benefit of a beneficiary or beneficiaries.
The trustee is the legal owner of the property subject to the trust. However, the trustee cannot benefit from the property (unless the trustee is also a beneficiary).
Most importantly, as well as owning the property, the trustee also owes certain obligations to the beneficiaries. The existence of these obligations are fundamental to a valid trust. It is from these obligations that the beneficiaries derive their rights.
While the trust’s assets are held for the sole benefit of the beneficiaries; which beneficiaries can benefit, and to what extent is determined at the trustee’s sole discretion.
Although the trustee is the owner of the trust property at law, the trustee can only act for the benefit of the beneficiaries.
Even though the trustee cannot benefit from the trust the trustee is accountable to the beneficiaries for any loss.
If you find this a bit heavy ready, don’t worry. You are not alone. Even the experts can’t agree as to exactly what a trust is!