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A directed trust is an investment trust in which the trustee is directed by a number of other trust participants in implementing the trust's execution. [1] [2] That trustee is referred to as a Directed Trustee. Examples of other trust participants include a distribution committee, trust protector, or investment advisor.
Many trusts allow for additional deposits (cash, securities, real estate, etc.) at the direction of the settlor or others, provided the trustee is willing to accept those assets. It can even be funded after death by a "pour-over" provision in the grantor's last will, specifying his or her intent to transfer property from the estate to a trust.
Discretionary trusts are the most common trust method used in Australia, where the trustee is given complete direction as to how trust income is distributed to beneficiaries. [4] Family trusts are the typical discretionary trust, used to hold the personal or business assets of a family. [ 5 ]
The borrower's equitable title normally terminates automatically by operation of law (under applicable statutes or case law) at the trustee's sale. The trustee then issues a deed conveying the legal and equitable title to the property in fee simple to the highest bidder. In turn, the successful bidder records the deed and becomes the owner of ...
The trust's income can, however, be taxed in the hands of either the trust or the beneficiary. A trust pays CGT at the rate of 20% (individuals pay 10%). Trusts do not pay deceased estate tax (although trusts may be required to pay back outstanding loans to a deceased estate, in which the loan amounts are taxable with deceased estate tax). [54]
The difference between discretionary and non-discretionary accounts is critical, but very few individual investors even know this difference exists. The biggest difference is that with a ...
Discretionary trusts are trusts which require that the trustees exercise their powers, in the same way as a fixed trust, but allow some discretion in how to do so, in a similar manner to mere powers. Since trustees hold the discretionary power to choose how to act under an established boundary set out by the settlor of a trust, evidential ...
beneficiaries under a bare trust (including a constructive or resulting trust), to whom the trustee owes basic duties arising by law; and; beneficiaries under an express trust (either an inter vivos trust or a testamentary trust), where the trustee owes additional duties and has additional powers specified by the trust instrument.