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Glossary of terms used on this site

There are 73 entries in this glossary.
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T

Term Definition
Testamentary Trust

A testamentary trust is a trust created by a will. It is generally a discretionary trust - one where the Trustee has full discretion about who benefits, and to what extent, under the trust. The significant advantage of a testamentary trust is that the assets are owned by the trustee, and the benefit of the income and capital of the trust passes to the beneficiaries. This separation of control and benefit allows testamentary trusts to protect assets from any legal action involving the beneficiaries and/or misuse of those assets.

The terms of the testamentary trust are set out in the will. These terms can restrict the ability of any of the beneficiaries to control the activities and investments of the trust or give them complete control. The only way that a client can ensure that the assets are fully protected is to have at least two trustees, an independent trustee together with the primary beneficiary.

Total assets

Made up of fixed assets (plant, machinery and equipment) and current assets which is the total of stock, debtors and cash.

Total liabilities

Include all the current liabilities, long term debt and other miscellaneous liabilities the business may have. It is important to look at what makes up total liabilities, and how these figurers change over time.

Trade sale

Sale of your business to a competitor

Trustee

A trustee carries the fiduciary responsibility and liability to use the trust assets according to the provisions of the trust instrument (and often regardless of their own or the beneficiaries' wishes). The trustee may find himself liable to claimants, prospective beneficiaries, or third parties. In the event that a trustee incurs a liability (for example, in litigation, or for taxes, or under the terms of a lease) in excess of the trust property they hold, they may find themselves personally liable for the excess.

Trustees are generally held to a "prudent person" standard in regard to meeting their fiduciary responsibilities, though investment, legal, and other professionals can be held to a higher standard commensurate with their higher expertise. Trustees can be paid for their time and trouble in performing their duties only if the trust specifically provides for payment. It is common for lawyers to draft will trusts so as to permit such payment, and to take office accordingly: this may be an unnecessary expense for small estates.

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Testimonials

Andrew said

Jim pro­vided very sound and practical advice on what to do if one of the busi­ness partners wanted to leave. His Suc­ces­sion Agree­­ment elim­ina­ted any questions as to what would hap­pen and how it would hap­pen. Thanks Jim.