OH 53

1
Learning Objectives

• 4. Analysing the Rules Pertaining to a Trust
  Corporation by
• Comprehending the legal nature of a Trust
• Interpreting the formation, documentation and
  Membership of a Trust
• Interpreting the advantages and disadvantages of
  a Trust
• Examining accounting and taxation requirements of
  a Trust
• Examining the Banking requirements of a Trust

OH 53
2
Criteria

• 4. Analyse the Rules Pertaining to a Trust
• Define a Trust
• Describe a Trust as a legal entity
• List the requirements for a valid Trust
• Describe the Trust Instrument
• Describe the parties and their respective roles
  in a Trust
• List the two main types of Trusts
• Define a Business Trust

OH 54
3
Criteria (Continued)

• 4. Analyse the Rules Pertaining to a Trust
• List the advantages of a Trust
• List the disadvantages of a Trust
• List the accounting records to be kept by a Trust
• Describe the taxation of a Trust
• Describe the liability of the Members of a Trust
• Judge the contractual capacity of a Trust

OH 55
4
Requirements for a valid Trust

• There must be an intention from the
  founder/donor, to create a Trust and he/she must
  used sufficient terms to create it, namely
• Clearly described property
• Identified/identifiable beneficiaries or a
  clearly described impersonal or personal
  objective
• A Trustee who has undertaken to act as such and
  who, in his assigned capacity, controls the
  assets or owns them
• The Trust object must be a lawful one

OH 56
5
Trust Instrument

• The Trust Instrument contains the
• Terms and conditions agreed to by the Donor,
  Trustees and Beneficiaries
• Determines how the Trust will be administered
• Determines who the parties to the Trust are
• When and how the Trust will be terminated

OH 57
6
Parties in a Trust

• There are three parties who play an important
  role in Trusts, namely
• The Donor
• The Trustee
• The Beneficiary

OH 58
7
Types of Trusts

• There are 2 main types of Trusts namely
• Testamentary Trust
• Inter Vivos Trust
• These Trusts can be sub-divided into
• Business Trusts
• Charitable Trusts
• Discretionary Trusts
• Pour-over Trusts

OH 59
8
Credit Risks of Trusts

• The Bank must ensure
• That the transactions are always to the benefit
  of the Beneficiaries
• That the Trust Deed specifies the powers of the
  Trustees
• The powers of the Trustee must be verified in
  the Trust Deed to ensure that they have the
  necessary power to sign Suretyships on behalf of
  the Trust

OH 60