Most commonly encountered legal forms of Trusts include:
Discretionary Trust
Trustees possess plenary powers to apply income and capital to specified beneficiaries in any manner or proportion as they choose. It is not possible for the beneficiaries to compel the trustees to provide any particular benefit. The trustees will usually provide a consideration of a number of factors including how the income should be distributed among the beneficiaries but this is never binding. It is always advisable to seek specialist advice before establishing a discretionary trust due to the significant tax implications involved.
Bare Trust
Trustees hold assets in a simple fiduciary capacity with immediate and absolute ownership rights. In most cases, the trustee does not perform any active duties. A simple document known as a Declaration of Trust is usually used to the establishment of bare trusts, which can be created orally. It is common to use bare trusts to transfer assets to minors who may not have the legal capacity to handle them, or to acquire shares without having those acquisitions become public knowledge.
Fixed Interest Trust
It is the trustee's responsibility to decide how assets will be distributed under a Fixed Interest Trust (also known as an interest in possession trust or a life interest trust). A beneficiary has a fixed right to receive a specified amount of income or capital at a given point or over a certain period, as specified in the trust agreement. It is possible for trustees to fix trust income for a specific beneficiary for a set term or 'limited interest' period; the trust assets automatically continue in another beneficiary's name when the term ends.