Friday, November 25th, 2022
If you have ever shared a secret with a friend, this article is for you. Once you open your safety net and share a secret with a friend, you have trusted them with something important with the expectation that they will keep it safe. Forming a trust is similar to this. A trust refers to the duty that rests upon a person described as a trustee. In this type of relationship, one party (called the trustor) gives a second party (called the trustee) the right to hold title to assets or property for the benefit of a third party (called the beneficiary). This type of relationship is fiduciary which means the person who holds this relationship is in a position of trust with one or more parties.
Trust, honesty, humility, transparency and accountability are the building blocks of a positive reputation. Trust is the foundation of any relationship.
There are various reasons why one would form a trust. Various reasons for using a trust exist, these include:
A trust comes in various categories, namely:
With a funded trust, a trustor places assets into a funded trust during their lifetime while in an unfunded trust, said trust is only in existence as a trust agreement and does not include funding however, it may become funded upon the death of the trustor, but it might also stay unfunded.
Living trusts are written documents that provide an individual’s assets as a trust for their benefit and use during their lifetime. Once that individual dies, the assets are transferred to their beneficiaries.
Testamentary trusts on the other hand specify how the individual’s assets are designated once that individual dies.
Revocable trusts can change or be altered during a trustor’s lifetime. However, a trustor cannot alter an irrevocable trust once they establish the trust.
Trusts given their nature may also become irrevocable upon the death of the trustor making them the most desirable because they cannot be changed.
Viable examples of trusts in Uganda
In Uganda, the government administers trust by holding property on behalf of its citizens. Article 237(b) of the 1995 Constitution of Uganda has created a public trust over specified important renewable natural resources such as natural lakes, rivers, wetlands, forest reserves, game reserves and National parks, vesting them in the state to hold and protect for the common good of all citizens of Uganda.
The National Social Security Fund (NSSF) is in charge of the collection of workers’ savings, so they are the trustees and workers are the beneficiaries.
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