Trust Formation, Trust Deeds and Types of Trusts
Formation requires a settlor with capacity, intention to create a trust, identifiable trust property transferred to the trustee, and identifiable beneficiaries (or a valid charitable purpose). The trust deed is the constitutional document: it names the parties, defines the trust fund, sets out powers of investment, distribution and appointment, and states whether default duties are modified. A candidate must be able to read a deed and identify which powers are discretionary and which are mandatory.
Know the main types: fixed trusts (beneficial interests fixed), discretionary trusts (trustee chooses among a class), bare trusts, charitable trusts (requiring exclusively charitable purposes and public benefit), trading trusts, family trusts, and superannuation or unit trusts. Trap: confusing a discretionary beneficiary's expectancy with a proprietary interest - a discretionary beneficiary has no fixed entitlement until the trustee exercises discretion, but still has rights to information and to have the trust administered properly.
Formalities matter: trusts of land must be evidenced in writing and signed; dispositions of equitable interests must be in writing. A trust that fails for uncertainty or lack of formalities may be void or unenforceable, and the property may result back to the settlor.
Rule of thumb: for any formation question, run the checklist - settlor capacity, intention, certainty of property, certainty of objects, formalities, and whether the deed modifies default duties. If one element is missing, the trust likely fails.