Purposetrust
Purpose trust
- What it is
- A trust created for a particular purpose rather than for the benefit of specific people
- How it differs
- A classic trust has beneficiaries; a purpose trust has a purpose
- Who oversees it
- The enforcer — a person obliged to ensure that the purpose is carried out
- Where it applies
- Holding company shares, maintaining assets, charitable and corporate tasks
- An important nuance
- This form is not recognised in every jurisdiction
In plain words
A purpose trust is a structure created to achieve a particular purpose rather than for the benefit of specific people. This is its fundamental difference from a classic trust: there, beneficiaries receive the benefit; here, there is a task that must be carried out.
Since there are no beneficiaries able to demand performance, a separate figure is introduced — the enforcer. Their duty is to ensure that the trustee acts in accordance with the stated purpose and, where necessary, to demand this. Without such a mechanism the structure would be unworkable.
Purpose trusts are used for corporate and special tasks: holding company shares so that the structure does not depend on changes of owners, maintaining particular assets, supporting long-term projects, charitable purposes. It is a highly specialised instrument: it is not recognised in every jurisdiction and is created for a specific task with specialist lawyers.
Where purpose trusts are used
How the structure works
- Clearly formulated
- Lawful and certain
- The basis of the whole structure
- Ensures performance
- May demand action
- Takes the place of beneficiaries
- Acts within the purpose
- Fiduciary duties
- Reporting
- Not recognised everywhere
- Requirements on duration
- Tax regime
How it is created
- 01Formulate the purpose of the structure
- 02Choose a jurisdiction that recognises it
- 03Appoint the trustee and enforcer
- 04Transferring assets
- 05Monitoring performance of the purpose
What you need to know
- The trust is created for a purpose, not for the benefit of people
- The enforcer must ensure the purpose is carried out
- The form is not recognised in every jurisdiction
- The purpose must be lawful and certain
- It is a specialised instrument, not a universal one
Common mistakes
- Using the structure without a clear special task
- Formulating the purpose vaguely
- Not appointing an enforcer with legal capacity
- Choosing a jurisdiction where the form is not recognised
- Copying someone else’s structure without analysing your own situation
What this means for a BRIDGES client
Non-standard structures always require explanation in due diligence: reviewers want to understand why the structure was created and who stands behind it. We prepare such explanations in advance and with documents.
Frequently asked questions
01 /What is a purpose trust?
A trust created to achieve a particular purpose rather than for the benefit of specific beneficiaries.
02 /Who ensures the purpose is carried out?
The enforcer — a specially appointed person obliged to oversee the trustee and demand performance of the purpose.
03 /How does it differ from an ordinary trust?
In an ordinary trust, beneficiaries receive the benefit. In a purpose trust there are no beneficiaries — there is a task that must be carried out.
04 /Where is this form used?
In corporate and special tasks: holding shares, maintaining assets, long-term projects, charity.
05 /Is it recognised everywhere?
No. Purpose trusts are not recognised in every jurisdiction, so the choice of country is fundamental here.
06 /Is it suitable for protecting family assets?
Other structures are usually used for those tasks. A purpose trust is a specialised instrument for a specific task.
See also
Read next
This material has undergone editorial review by BRIDGES.
Are there non-standard elements in your structure?
We will prepare a clear explanation for the check — before questions arise.