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Trusts established for a specific purpose
Trusts established for a certain purpose which do not identify beneficiaries from their essence can be established for support of a legitimate goal which is specific, reasonable and can be fulfilled without using procedures which would be immoral, non-ethic, illegal or which would be in contradiction with the governmental policy of the country where the trust is established.
This trust requires in general (there are local differences in individual jurisdictions):
- 1.trustee who is appointed in the post,
- 1.protector, who will enforce interests of the trust in question and who can be settlor or an authorised person, but not the trustee,
- 1.protector's successor.
The protector is often authorised to recall the trustee and appoint another one. The conditions of the trust in question should precisely specify on which event the trust will be terminated and what is to be done with the trust assets upon such a termination.
If the trustee who is appointed in this post has suspicion that the protector does not conduct properly, he or she must notify the Attorney General of such an alleged negligence of obligations or illegal conduct, by sending the appropriate notification to the Attorney General, together with the Trust Deed. The Attorney General can ask the court to appoint another trust protector.
This type of trust is often established by a civil-law court in the Anglo-Saxon countries, when for example parents of minor children die during a tragic accident. Also minor children (descendants) are in an overwhelming majority of countries automatically heirs at law, but for their low age they are not at the moment able to deal responsibly with the assets of their tragically deceased parents. The court thus has a tool through which it can transfer the assets to the trust formed this way, which is established and managed by a credible person with appropriate experience. The trustee takes care, on the basis of the court decision in good faith and according to his or her best conscience, of the trust assets and pays out benefits to the minor children until they achieve for example 25 years of age, when they are already able to manage their financial matters by themselves. At that moment the activities of the trust can be terminated and the assets can be transferred to individual beneficiaries, in this case to the descendants who are already of age.
Law governing the trust
Although it could appear that the trust is automatically governed by the law of the country where it has been formed, it is usually not the case. It is necessary that the law which should govern the trust be uniquely defined in the Trust Deed and in the Letter of Wishes. Thus it is possible to avoid possible judicial disputes or a number of troubles which could be faced by the trust for the time of its existence. It could happen that the established trust which does not specify uniquely the law of the country, according to which the administration and activities, including its establishment are governed, will be considered as a trust established in an absolutely different jurisdiction when regard is taken, for example, to the place of residence of the settlor, trustees or even to the fact where a major part of assets is located, possibly according to the residential addresses of beneficiaries.
A number of jurisdictions make it possible that a trust which has been established in their territory can be subject to the laws of a third jurisdiction. The conditions of the trust can thus specify that its separable aspects, especially those which concern the administration of the trust will be governed by a different law than the appropriate law applicable to the trust under which it has been formed. The law governing separable aspects of a trust can also be changed from the formation country law to a law of another jurisdiction and vice versa. If it is not specified in the Trust Deed by which law the trust is governed, the trust will be governed by the law corresponding to the intent of the trust settlor, unless it is in contradiction with the local jurisdiction and legislation.
If this intent is unclear, then the trust is often governed by the jurisdiction with which the trust had the closest contact at the time of its establishment, i.e. according to the place of residence or registered office of the trustee, place of trust administration specified by the settlor, where the targets and purposes of the trust are to be achieved and where the trust has been registered. In the case when it is not clear enough it can be decided by a competent court.