An entity controls the discretionary trust if the trustee either acts, or might reasonably be expected to act, in accordance with the directions or wishes of the entity/or the entity's affiliates, or both the entity and its affiliates.
A Discretionary Trust is a legal arrangement which allows the owner of a life policy (the settlor) to give their policy to a trusted group of people (the trustees), who look after it. At some time in the future they pass it on to some people from a group that the settlor has decided (the beneficiaries).
Controlling Persons of a trust, means the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership).
Generally, an executor administers the estate of the person who died, while a trustee administers a trust for the benefit of the named beneficiaries.
This is a fundamental concept of trust law: the separation of legal and equitable title. In other words, while the trustee has the legal authority to manage and control the assets, they do so not for their own benefit, but for the beneficiaries.
It is fair to say that in a modern discretionary trust, true control rests not with the trustee, but with the Appointor – the person who has the power to remove or appoint the trustee.
Often this is done for tax planning purposes (to use the donor's gift tax exemption, for example). Generally speaking, once a trust becomes irrevocable, the trustee is entirely in control of the trust assets and the donor has no further rights to the assets and may not be a beneficiary or serve as a trustee.
A controlling person may exhibit extreme jealousy, frequently accuse their partner of infidelity, or attempt to control their interactions with others. They may even put their partner under surveillance, monitoring phone calls, texts, or emails without consent – or after pressing them for consent.
The trustee is the person who controls property inside of the trust and handles investment of trust property. The trustee is responsible for carrying out the terms of the trust agreement.
In the case of a Discretionary Trust, the Trustee has legal control of the funds. Therefore, they are the legal owner. However, the funds are held and distributed to benefit the beneficiaries. The beneficiaries are the beneficial owners.
An executor can also be someone you've named as a beneficiary in your will. The role of an executor is a serious one which carries a lot of responsibility. When choosing your executor or executors you need to bear this in mind. It should be someone you trust to carry out this work.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
In addition to following all directions in the trust document, the trustee is responsible for: Assuming legal responsibility for administration of the trust. Taking control of and protecting trust assets.
Trustee: Trustees often have more ongoing authority, especially in the case of living trusts or long-term trusts. They may manage and distribute assets over many years, depending on the terms of the trust.
A control person is one who: (1) owns or controls 10% or more of the voting stock of a corporation; ( 2) holds a position as an officer or director of a corporation; or (3) is in a position to influence the decision-making process of a corporation.
A controlling person: defined as an individual who has significant responsibility for managing the business/legal entity (e.g. CEO, CFO, Treasurer, etc.). Each beneficial owner: all those who directly or indirectly own a 25% stake or higher in the business/legal entity.
A trustee is in charge of the trust and manages the trust assets on behalf of the grantor and according to the trust agreement. A trust beneficiary receives the assets of the trust.
Generally, a trustee cannot alter the fundamental terms of a trust unless the trust document provides a specific mechanism to do so or all beneficiaries consent to the change.
A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.
Managing and distributing the assets of a discretionary trust involves the trustees exercising their powers responsibly, making informed decisions about income and capital distribution, and engaging in sound financial planning.
Controlling Persons of a trust, means the settlor(s), the trustee(s), the protector(s) (if any), the beneficiary(ies) or class(es) of beneficiaries, and any other natural person(s) exercising ultimate effective control over the trust (including through a chain of control or ownership).
So, now you know that the Trust Maker holds the most power before the Trust is established, but the Trustee holds the most power after the Trust is established. And you also know that in many cases, during your lifetime you have both roles. So who has the most power in a trust? If you are creating it, YOU do.