It has long been the position in the English legal system this trusts can only be one of two types, namely: private as well as charitable. However , there now exists a creature connected with statute which introduces a third type of trust called a reason trust.
A purpose trust is a trust which does not have almost any beneficiaries and exists for a specific purpose. A purpose trust for charitable purposes would not be valid under the action. Purpose legislation exists in jurisdictions such as Liechtenstein, Cyprus, Cook Islands, British Virgin Islands, Nevis, Turks in addition to Caicos Islands, Antigua and the Cayman Islands. Jersey and the Department of Man introduced purpose trust legislation in 1996. The formation given below relates specifically to Isle of Gentleman purpose trusts formed under the Isle of Man Reason Trusts Act 1996.
Purpose trusts are not trusts inside true sense and are designed to be used as adjuncts to help taxation planning structures in various ways.
How it works
A goal trust is formed as a result of a deed of trust concerning a settlor and a trustee or trustees. To be enforceable the trust document must clearly define the reasons the trust so that a court may determine these kind of purposes.
There must be two or more trustees, at least one of whom need to be a person in one of the categories specified in the act.
To apply the trust there must be an ‘Enforcer’. The Enforcer runs the actions of the trustee to ensure that those actions further often the purposes stated in the trust documents. The trust instrument must provide for the Enforcer to have an absolute right with access to any information or document which relates to the believe in, the assets of the trust or to the administration of the trust.
The trust instrument must specify the event then may cause the trust to terminate and must provide for the exact disposition of surplus assets of the trust upon it has the termination.
A purpose trust cannot have any beneficiaries, consequently all assets in the trust must ultimately be paid back towards the purposes of the trust, as set out in the rely on document.
The designated trustee must keep a copy of the have confidence in deed, a register and trust accounts. These health care data are open to inspection by the Attorney General but are not available for public inspection.
The trust deed and the intent
Much care has to be taken in drafting the trust device particularly with regard to the purpose. There are differences in the laws for other jurisdictions which have to be taken into account if a trust shall be established. Bermuda Law, for instance, now requires a substantive intention beyond the mere holding of shares.
The confidence deed document will set out the duties of the trustee or trustees and the enforcer.
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The position of the enforcer is to oversee the trustees to ensure that the very trust is administered in order to satisfy the purpose for which it turned out established. An enforcer can be a corporate entity as can the trustees. There is nothing to prevent one being the subsidiary from the other.
The enforcer may not be a trustee of the have faith in, nor may he profit from the trust.
Provisions really exist in the law for the registration or removal of the enforcer.