Creating a Family Trust

• A family trust is recognized as a legal entity separate from the creator of the trust. The function of the trust is to hold assets and property, for the benefit of the designated person or group of persons. The trustor is also called the grantor, settlor or donor. When you set up a family trust, you must select a person or corporate entity --the administrator -- to manage the assets and property placed in the trust. You can sometimes name yourself as the administrator or trustee, but often a family member or close friend is selected. You also may hire a financial professional or corporate entity to manage your family trust, such as a bank, financial planner, attorney or a trust management firm.
  
  

The Trust Deed

• The document outlining the terms and conditions under which you establish your family trust is the trust deed. You and the administrator must sign the deed, and you must give the administrator any assets you wish to place into the trust. Ownership of all assets and property placed into the trust fund must be transferred into the name of the trust. The administrator becomes accountable for the trust and its assets and typically has broad powers to administer the trust and manage the assets. However, an administrator can only dissolve a family trust if she has been granted that power by the trustor, as specifically indicated in the trust deed.
  
  

Fiduciary Duties

• The person you designate as the administrator or trustee of your family trust is a fiduciary, and as such, that person becomes your trusted representative, upon your death. The law takes fiduciary duties seriously, and as a fiduciary, your trust administrator has an absolute duty to properly administer the trust and its assets on behalf of your beneficiaries. Generally, the creator of a family trust is the only person who can dissolve the trust, unless the trustor specifically requests in the trust deed that the administrator should dissolve the trust upon distribution of all trust assets, or in the event the trustor becomes mentally incompetent.
  
  

Beneficiary Powers

• It is possible for an administrator to dissolve a family trust by direction of the trust beneficiaries. Generally, if all beneficiaries can agree on a course of action, they have the power to change or dissolve the trust. However, it also depends on the laws in the state where the trust was created. Jurisdiction can make a significant difference in the court’s treatment of your particular type of family trust. If your beneficiaries can prove that the objectives of the trust have been met or the trust can no longer meet the objectives outlined in the trust deed, the trust can be dissolved.