A trust is a relationship that exists between the Settlor, the Trustees and Beneficiaries. A trust is settled when a person (the “Settlor”) transfers property to another person (the “Trustee”) to hold for the benefit of one or more persons (the “Beneficiaries”). The trust agreement or deed defines what the Trustees may do with the trust property and outlines the interests of the Beneficiaries.
Trusts are used in Estate Planning and Tax Planning and as asset protection tools. A trust can be created by a Will to come into existence as a result of the death of the testator (testamentary trusts) or settled during the settlor’s lifetime (inter vivos and life interests trusts).
The inter vivos trusts and life interest trusts are subject to a flat highest marginal rate of tax applicable to individuals. Also all income is attributed to the settlor and their spouse. A testamentary trust may be subject to marginal rates applicable to the individuals for the first 3 years of its existence.
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