Trust Services

Purpose Trusts

What is a purpose trust?

As the name suggests, a purpose trust is one set up for a specific purpose - for example, to bequeath funds to a charitable foundation or for a corporate purpose such as securitisation of major assets. It can continue indefinitely or for a term of 100 years. Given the service and structure of a purpose trust, a private trust company (popular with individuals from civil law countries) may be used.

The introduction of the Trust (Special Provisions) Amendment Act 1998 refined the law relating to trusts settled for non-charitable purposes by requiring certian conditions to be satisfied.

The trust must be lawful and cannot oppose public policy.

What are the benefits of a purpose trust?

Purpose trusts offer special benefits when they are used, especially in concert with a private trust company. For example, they offer an opportunity to separate the settlor from the ownership of the company that acts as the trustee of a family trust. Economic benefit accruing within the purpose trust is not an issue because the required capitalisation of a private trust company is nominal. A licensed trust company will often create the purpose trust by way of declaration. The purpose of the trust will be to hold the shares of the private trust company.

For more information on Charitable Trusts, please contact us.

<< Return to Trust Services page