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Types of Trust
There are many ways of classifying trusts, either by what they seek to achieve, or the technical content of the trust documentation. Some of the major classifications are listed below:
- Discretionary Trust: the trustees have the power to choose who benefits, how much they will receive and when
- Interest in Possession Trust: the trustees must pay the trust income to named people for a specified period (usually life). The trust may terminate at the end of this period, or continue, perhaps as a discretionary trust.
- Accumulation and Maintenance Trust: often set up to look after children. The income and perhaps capital is used to assist with the maintenance of the child, by settling school fees, for example. Any surplus income is accumulated to the capital. The trust ends at a point when the child has become suitably "mature" - usually before the age of 25.
- Express Trust: the terms of the trust are explicitly agreed between the settlor and the trustee. Most modern trusts are explicitly set down in a lengthy trust deed.
- Implied Trust: where the actions of the parties show a trust arises. An example might be a vendor holding a deposit for goods pending their receipt. The vendor may be considered to be trustee of the deposit in favour of the purchasers.
- Constructive Trust: sometimes the courts will impose a trust as a remedial mechanism for ensuring that a fair outcome arises.
- Asset Protection Trust: in some cases the creation of a trust can be registered. Providing that the settlor was solvent at the time, the courts will uphold the trust and shield its assets from the claims of future creditors.
- Retained Powers Trust: the settlor of a trust can sometimes retain powers over the assets. These might include powers of investment, but could include others. Where the trust is constructed together with a tax mitigation strategy, the retention of powers by the settlor may serve to negate tax benefits that could otherwise accrue.
- Charitable Trust: created where the objects are exclusively charitable. Gibraltar has its own registry of charitable trusts.
- Non-Charitable Purpose Trust: whilst trusts have traditionally been established for the benefit of individuals, the use of trusts in commercial transactions has seen the rise of trusts created for purposes rather than people.
