Updated
GL-S-06
Glossary · Structures and trusts
Settlor / Trustee / Beneficiary / Protector - Trust parties
01 / In 30 seconds
The short answer
- Settlor
- Settlor: the person who transfers assets into the trust
- Trustee
- Trustee: the legal owner of the assets, acting in the interests of the beneficiaries
- Beneficiary
- Beneficiary: the person for whose benefit the trust is created
- Protector
- Protector: oversees the trustee and may hold a right of veto
- The key idea
- Legal ownership and economic benefit are split between different persons
02 / In plain words
What Settlor / Trustee / Beneficiary / Protector means
A classic trust has four roles. The settlor is the person who transfers assets into the trust and sets its terms. The trustee becomes the legal owner of those assets but must manage them solely in the interests of the beneficiaries and according to the rules set by the settlor.
The beneficiary is the person for whose benefit the trust is created: they receive income, assets or other benefits on the terms set out in the documents. The protector is an additional figure of oversight: they do not manage the assets but may approve the trustee’s key decisions, replace the trustee or hold a right of veto on important matters.
The point of the structure is the separation of legal ownership and economic benefit. That is why trusts are used for asset protection and succession planning. But the modern context is important: beneficial owners are disclosed to regulators and banks, and your country of tax residence may view the trust under its own rules. It is a lawful instrument, but not an instrument of invisibility.
A case from practice
When preparing for a programme, a client had a trust structure set up many years earlier. The check required an explanation of the trust’s purpose, the roles of the parties and the origin of the assets. The documents were gathered in advance — and the matter was closed without protracted requests.
Where these roles are encountered
- Succession planning
- Protecting family assets
- Providing for children and relatives
- Managing assets in case of incapacity
- Charitable structures
- Reviewing a client’s existing structures
03 / What it covers
Who is responsible for what
Settlor
- Transfers the assets
- Sets the terms of the trust
- Loses direct control after the transfer
Trustee
- Legal owner
- Manages according to the rules
- Bears fiduciary duties
Beneficiary
- Receives the benefit
- Rights under the terms of the trust
- Disclosed as a beneficiary
Protector
- Oversees the trustee
- Right of veto on key decisions
- May replace the trustee
04 / How it works
How the structure is built
Define the purpose of the trust
Select the trustee and jurisdiction
Draw up the trust documents
Transferring assets
Management and reporting
05 / Key facts
What you need to know
01
The trustee is the legal owner but acts in the interests of the beneficiaries
02
The settlor loses direct control after transferring the assets
03
The protector is a mechanism of oversight, not management
04
Beneficial owners are disclosed to regulators and banks
05
Your country of residence may characterise the trust in its own way
Common mistakes
- Creating a trust to make ownership opaque
- Keeping actual control contrary to the structure
- Not taking into account the tax regime in the country of residence
- Choosing a trustee without checking their reputation
- Not setting out the protector’s powers
06 / Expert advice
How to prepare in advance
Before creating the structure, its real purpose is formulated: asset protection, succession, providing for specific people. Then the jurisdiction and trustee are selected, and it is always checked how the trust will be characterised in your country of tax residence — that is where surprises most often arise. Roles and powers are set out in detail.
What we do for you. Existing trusts and foundations almost always become the subject of a separate review in due diligence. We prepare a documented explanation of them in advance: why the structure was created, who the parties are, where the assets came from. A transparent history removes the questions.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
The founder of the trust: the person who transfers the assets and sets the terms on which they will be managed.
Legally, the trustee. But the trustee must act solely in the interests of the beneficiaries according to the established rules.
The protector oversees the trustee: approves key decisions, may hold a right of veto and may replace the trustee. It is a mechanism of oversight, not management.
No. Beneficial owners are disclosed to regulators and banks. A trust is a planning instrument, not an instrument of invisibility.
In some structures, yes, but this affects the tax characterisation and how the structure is perceived by reviewers. Such a decision is worked through in advance.
Differently in different countries. The key question is how your country of tax residence characterises it, not only the trust’s country.
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
