When does a trust take effect?
A trust takes effect depending on whether it’s an inter vivos trust (created during the settlor’s lifetime) or a testamentary trust (created via a will).
Inter vivos trusts
An inter vivos trust becomes effective immediately upon signing and funding. It is typically evidenced by a trust deed.
Testamentary trusts (will trusts)
A testamentary trust, also known as a will trust, takes effect upon the death of the person whose will created it.
There is typically a period of administration between the date of death and when the trust formally commences. The trust begins either when assets are transferred to the trustees or when the administration is complete, whichever comes first.
In both cases, for a trust to be valid, certain requirements known as the “three certainties” must be present:
- Certainty of intention to create the trust;
- Certainty of the assets involved (subject matter); and
- Certainty of the beneficiaries.
These factors ensure the trust is clear, legally binding, and can be enforced effectively.