What exactly is a Trust?

A trust is a legal relationship whereby a person (settlor) transfers property into an entity initially, or at later times.  Trustees administer that property for the benefit of beneficiaries. 

It has been mentioned previously that many trusts may be non-compliant in terms of trust law, and there can be a number of reasons for this....

The initial settlement amount, usually relatively small (usually less than $100) has not been passed to the trustees to create the trust.

Ownership of the property is not transferred into the trust name. eg. Title on the family home.

No bank account has been opened for the trust, and there has been an intermingling of personal and trust money.  (Usually through husband and wife personal accounts)

Husband and wife act as sole trustees, often administering property previously held/owned by them.

There is no record of the assets and liabilities of the trust - bank accounts, investments, mortgages etc.

In these cases, what has changed?  The previous owners (settlors) have not really transferred the ownership and control of the property to the trustees. 

In other areas, trustees have not read or understood the trust deed - therefore they have failed to meet their obligation to act in terms of the deed, which is the founding document.

Many trustees fail to be included/involved in the decision making process and any decisions made.  Often a permanent record of these decisions by way of minutes or resolutions is not kept. 

In most cases, these omissions are due to a lack of knowledge and education on trusts.  What we are likely to see in the future is some regulation and guidelines as to "best practice" around the formation and administration of trusts.