Trust Instrument - Provisions

Provisions

The provisions of a trust instrument will vary according to the type of trust, and the nature of the trust property.

• A bare trust over a single asset will characteristically have very few provisions.
• A discretionary trust over a mixed bag of investments will usually have far greater provisions regulation the exercise and management of the trust fund.
• A trust which is set up as a unit trust will have additional specific provisions specific to the calculation of the NAV and acquisition and redemption of units.
• Settled land act settlements have specific provisions relating to the underlying subject matter.
• Trusts which are set up to protect vulnerable beneficiaries, such as blind trusts or spendthrift trusts will have specific provisions relating to the nature of the beneficiaries.

However, in general, most trust instruments will have provisions which address the following aspects of the administration of the trust:

1. The name of the settlement and definitions and interpretation provisions
2. The legal nature of the trust (i.e. a trust for sale)
3. Powers to add and exclude beneficiaries
4. Trusts over property added to the trust fund
5. Power of appointment (i.e. distribution)
6. Trusts in default of appointment, and, sometimes, ultimate default trusts
7. General administrative powers of the trustees
8. Extended power of maintenance
9. Extended power of advancement
10. Usually, a trustee charging clause
11. Regulation of the appointment of new trustees
12. The proper law and forum and place of administration for the settlement
13. Often, an exclusion of settlor (and spouse) from benefiting from the trust (where required for tax reasons)
14. Usually, an indemnity for the trustees out of the trust fund

Most trust instruments will then also have two schedules:

1. a schedule setting out the powers of the trustees (often in addition to any powers granted or implied by operation of law)
2. a summary of the initial trust fund (usually a nominal amount of money)