CLA2601 Commercial law IIA
Assignment 2 2021
Unique Number: 619955
Question 1:
Generally, there will always be three (3) parties involved in a trust arrangement,
namely the settler, the trustee(s), and the beneficiaries.
The founder; is the person who creates the trust. The founder can be more than one
person. For example, in cases where jointly owned property is transferred, the
settlors will be the joint owners of that property. Sometimes the trust only names one
person as founder yet the property is owned in joint names.
Where property is transferred to trust via a will on death then the settlor will be the
testator/testatrix of the will (or, in the case of a trust arising on intestacy, the intestate
person).
The trustees are the legal owners of the trust property who hold it and administer it
for the benefit of the beneficiaries. The trustees will normally be named in the trust
document and will frequently include the settlor. This will enable the settlor to have a
degree of ongoing control over the trust property whilst alive. It is generally unwise
for the settlor to be the sole trustee.
Where the trust arises on an individual’s death the trustees will frequently also be the
executors of the will. Where the trust arises on intestacy, the trustees will be the
administrators of the estate.
Trustees hold a fiduciary position and therefore can only benefit from the trust
property in their capacity as a beneficiary. In such cases (particularly with
discretionary trusts) it is advisable to include provisions to avoid a conflict of interest.
Such a conflict could arise in a case where the power to appoint benefits was vested
in the trustees, where there was only one trustee, and where that trustee was also a
beneficiary. To avoid problems in such circumstances, the trust could include a
provision stating that for an appointment to be made to a beneficiary who is also a
Assignment 2 2021
Unique Number: 619955
Question 1:
Generally, there will always be three (3) parties involved in a trust arrangement,
namely the settler, the trustee(s), and the beneficiaries.
The founder; is the person who creates the trust. The founder can be more than one
person. For example, in cases where jointly owned property is transferred, the
settlors will be the joint owners of that property. Sometimes the trust only names one
person as founder yet the property is owned in joint names.
Where property is transferred to trust via a will on death then the settlor will be the
testator/testatrix of the will (or, in the case of a trust arising on intestacy, the intestate
person).
The trustees are the legal owners of the trust property who hold it and administer it
for the benefit of the beneficiaries. The trustees will normally be named in the trust
document and will frequently include the settlor. This will enable the settlor to have a
degree of ongoing control over the trust property whilst alive. It is generally unwise
for the settlor to be the sole trustee.
Where the trust arises on an individual’s death the trustees will frequently also be the
executors of the will. Where the trust arises on intestacy, the trustees will be the
administrators of the estate.
Trustees hold a fiduciary position and therefore can only benefit from the trust
property in their capacity as a beneficiary. In such cases (particularly with
discretionary trusts) it is advisable to include provisions to avoid a conflict of interest.
Such a conflict could arise in a case where the power to appoint benefits was vested
in the trustees, where there was only one trustee, and where that trustee was also a
beneficiary. To avoid problems in such circumstances, the trust could include a
provision stating that for an appointment to be made to a beneficiary who is also a
