Let's start with the basics:
There are three key role players in a Trust.
The first is the Donor, also known as the founder or settlor. This person or entity creates the Trust. His role is very short-lived, as he's not involved in the management of the Trust. Once he creates the Trust, he no longer plays a part.
The Trustee fills the second role. This is the person in charge of managing the Trust's assets on behalf of the beneficiaries. He isn't entitled to the income from the Trust's assets.
The third role player is the Beneficiary. This person is the purpose of the Trust and they enjoy all the benefits of the Trust.
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Now that you know who is part of a Trust, let's look at the four types of Trusts
1. Special Trust: Type A
This Trust is solely for a person or people with disabilities. The key point is that the person's disability makes it impossible for them to earn enough money for their care or managing their own financial matters.
2. Special Trust: Type B
Also known as, a Testamentary Trust, this Trust is set up for the relatives of a deceased person. The person's last will and testament is the basis of this Trust. Another defining characteristic of this Trust is that the youngest beneficiary is under the age of 21.
3. Inter vivos Trust
These also go by the name of as 'living' Trusts. The donor establishes the Trust is and it comes into effect during his lifetime. Unlike the Testamentary Trust, that is effective only after the creator's death. Lending money is the commonly used way to fund the Trust.
4. Business Trusts
This Trust is a vehicle for conducting a trade or business.
Lastly, we look at the 'special tax
rates' applicable to Trusts
Special Trusts enjoy a tax
rate of between 18% and 40%. While 'normal' Trusts are subject to a flat rate of 40%.
A crash course highlights only the basics.