Chapter 12 - Parties to a Trust

The Protectors - helps settlor retain control of the trust

Power of Protector:

• Power to appoint/remove trustee
• Power to obtain info about the trust fund
• Power to consent to the remuneration of the trustee

Advantages and Disadvantages of having a protector of trust:

+

• Slightly more control and info for settlor
• More security

-

• More costly 
• The protector must be paid
• Time-consuming

The Enforcer - enforced the purpose of a non-charitable purpose trust

• If the settlor is the sole beneficiary then it will be a sham trust.
• Settlors can be a trustees for their trust but it is not effective if the motivation of the trusts is tax avoidance

There needs to be a careful balance of the relationship between the trustees and the settlor because:

• The settlor needs to understand that the trust is now out of their control and that trustees are not obliged to follow their wishes
• The trustee must understand that they hold a fiduciary duty to the beneficiaries

Sham trusts

A trust is created for an unlawful purpose such as tax evasion. They occur when the settlor retains ultimate control over the assets.

For example:

• The settlor could be appointed as sole trustee
• Retain the power to override the trustee
• Appoint a 'puppet' trustee

Dummy settlor - A person whos name is recorded within a trust instrument as the settlor of a trust but who is…