Trusts and Estates
Trusts and Estates
Trusts and Estates
80 – 84)
INTRODUCTION
A trust
oIs a legal arrangement in which the grantor/settler
transfer property to a trustees for them to manage for
the benefit of a third person (the beneficiary).
oIt has developed as a special, flexible gift of property to
trustees not just for the benefit of existing adults but for
infants and for future unborn beneficiaries.
oAs such trusts can be used to used to preserve a
family wealth by minimising, for example incidence of
taxation or the risk of dissipation by a spendthrift heir
INTRODUCTION OF TRUSTS
oUnlike a company, it does not have a legal
personality, i.e. it cannot sue or be sued or own
property, instead it is the trustee who can do all
these.
oTrust is neither a holding company, a contract or
a will but may arise by virtue of a will, contract or
created by a company
oIt is a legal relationship defined by a document
known as trust deed or trust agreement.
IMPORTANT DEFINITIONS
Trustee is defined in Sec.3 to include the following;
o An executor, administrator, tutor, or curator; and
oA liquidator or judicial manager; and
oA person having or taking on the administration
or control of property subject to a trust; and
oA person acting in a fiduciary capacity; and
oA person having the possession, control, or
management of the property of a person under a
legal disability.
IMPORTANTDEFINITIONS
Grantor (settler)
oA person who transfers property to, or
confer a benefit on, a trust for no
consideration or for a consideration which
is less than market value of such a
property
GRANTOR (SETTLE) TRUST
Grantor trust
o It is a trust in which the grantor has retained control over the whole or part of the
corpus (is the sum of money or property that is set aside to produce income for a named
beneficiary) or income of the trust
o It is the trust in which the grantor has a power (either in whole or in part) to
revoke(end) the trust so as to acquire a beneficial interest in the corpus or income of
the trust which is exercisable at any time.
o It is the trust in which the grantor has the power to alter the trust so as to acquire a
beneficial interest in the corpus or income of the trust.
o It is also the trust in which a grantor has a reversionary interest in either the corpus or
income of the trust
The trustee will then be allowed a credit for any foreign taxes
paid in respect of taxable foreign income.
TAXATION OF TRUSTEES (Sec.83)
Chargeable trust income is calculated as = trust
income LESS part of it to which beneficiaries are
presently entitled to(both resident and non-resident
beneficiaries, regardless of the tax implication to that
income).
Chargeable trust income of a trustee is taxed at the
rate prescribed in the fourth schedule which is currently
30%
CIRCUMSTANCES IN WHICH TRUSTEES ARE TO BE CHARGEABLE
TO TAX ON THE TRUST’S FOREIGN SOURCE INCOME.