IFSP Trusts Foundation Certificate key terms

The person who creates a trust by transferring assets to trustees and setting out the terms on which those assets must be held and applied for the beneficiaries.

A person or corporate body holding legal title to trust property and obliged to manage and apply it in the beneficiaries' interests and in line with the trust terms.

A person or class of persons entitled to the benefit of trust property, whether as a fixed entitlement or as a discretionary object eligible for consideration by the trustees.

The assets held by trustees, which may include cash, investments, land or shares, together with any income and capital growth arising from them during the trust period.

The formal written instrument that establishes a trust, names the parties, identifies the trust property and sets out the trustees' powers, duties and the beneficiaries' entitlements.

Ownership recognised at law, which for trust assets sits with the trustee and allows them to deal with the property while remaining accountable to the beneficiaries.

The beneficial ownership that beneficiaries hold in trust property; it is enforceable against the trustee and generally against third parties who receive the property with notice.

A strict duty of loyalty and good faith owed by someone acting for another, requiring trustees to act honestly, avoid conflicts of interest and not profit from their position.

The standard requiring trustees to exercise such skill and diligence as is reasonable in the circumstances, often judged against a professional trustee's higher standard of expertise.

A transaction in which a trustee deals with trust property for their own benefit or on their own account, which is generally prohibited unless the trust deed expressly authorises it.

A situation where a trustee's personal interest, another role or a duty to a third party could improperly influence decisions taken on behalf of the trust.

A trust in which each beneficiary's share is defined in the trust deed, leaving trustees no discretion to vary the amounts or the identities of those entitled.

A trust where trustees decide whether, when and how much to distribute among a class of potential beneficiaries, none of whom has a fixed entitlement to trust assets.

A non-binding memorandum in which a settlor records guidance on how discretionary powers should be exercised, helping trustees understand the settlor's intentions.

An entitlement that has become fixed and unconditional in a beneficiary, so that it cannot be taken away and forms part of that beneficiary's own estate.

An entitlement that depends on a future event or condition, such as reaching a specified age, and does not become fixed until that condition is satisfied.

The retention of trust income within the trust fund instead of distributing it, adding it to capital, usually permitted only within limits set by the deed or by law.

A payment or transfer of trust income or capital to a beneficiary, made under the powers in the trust deed and properly recorded by the trustees.

The aggregate of all property, capital and accumulated income held by trustees from time to time under a single trust instrument.

The process by which new trustees are chosen and brought into office, using powers in the trust deed, statute or an order of the court.

The formal step by which a trustee leaves office, which normally requires the deed or statute to permit it and a valid replacement or continuing trustee to remain.

A person appointed under the trust deed with reserved powers, such as approving trustee appointments or distributions, intended to safeguard the settlor's intentions.

The standard requiring trustees to invest as a prudent investor would, considering the portfolio as a whole, diversification, risk and the trust's purposes.

A written document setting out a trust's investment objectives, risk tolerance, permitted asset classes and review arrangements, guiding trustees in managing the fund.

Spreading trust investments across different assets, sectors and markets to reduce the risk of loss from any single holding or adverse event.

A failure by a trustee to comply with the trust deed or with duties imposed by law, which may make the trustee personally liable to restore the trust fund.

A remedy requiring a trustee who has misapplied trust property to restore it or its value to the trust fund, putting the beneficiaries back in their proper position.

A process for following trust property, or its proceeds, into the hands of a recipient or into substituted assets so that a claim can be made against them.

A claim against a third party who receives trust property with knowledge of the breach of trust, requiring them to account for or return what they received.

A trust arising by operation of law where beneficial ownership returns to the settlor or their estate, typically because a transfer failed or a beneficial interest was not fully disposed of.

A trust imposed by law, regardless of the parties' intentions, to prevent unconscionable conduct, often where property is held by someone who should not keep it.

A trust established exclusively for purposes recognised as charitable, such as relieving poverty or advancing education, and enjoying favourable tax treatment as a result.

A legal rule limiting how long a trust may keep property from vesting in beneficiaries, preventing indefinite suspension of ownership.

A change to the terms of a trust, permitted where the deed allows it, all beneficiaries consent and are competent, or the court approves it.

The ending of a trust, typically when the trust period expires, the purposes are fulfilled or all beneficiaries agree to bring it to an end.

Payment to a trustee for acting, which is generally only permitted where authorised by the trust deed, by statute or by the court.

A trustee's right to be reimbursed out of trust property for properly incurred expenses and liabilities, protecting them from personal loss when acting correctly.

The trustees' obligation to keep clear records and report on trust assets, income and transactions so beneficiaries can see how the fund is being administered.