The trustees hold the account
A trust is a relationship, and it cannot hold an account by itself. The assets are legally owned by the trustees, who hold them for the beneficiaries on the terms set out in the trust deed. When a bank, payment institution or money services business opens an account for a trust, the account holder is in substance the trustee acting in that capacity. Statements may carry the trust's name, but the people with authority are the trustees.
That single point explains most of what follows. A payment instruction is valid when it comes from the trustees, or from someone the trustees have properly authorised, and when the payment falls within what the deed permits. Family members, advisers and even the person who created the trust do not acquire a right to move money simply because they are close to it.
In practice, a provider will set up the account mandate so that it mirrors the trustees' own decision-making rules. If the deed says trustees act by majority, the mandate should require a majority. If there is a sole corporate trustee, the mandate will name the individuals that company has authorised to sign on its behalf.
Start with the trust deed
The deed is the rulebook. Before any payment is made, the trustee should be able to point to the clause that allows it. The clauses that matter most for payments are usually these:
- Powers of distribution. Whether trustees may pay income or capital to beneficiaries, and whether that is at their discretion or on fixed terms.
- Administrative powers. Paying professional fees, taxes, insurance, property costs and other expenses of running the trust.
- Investment powers. Moving funds to brokers, managers or underlying companies, and converting between currencies.
- Delegation. Whether trustees may appoint agents or attorneys to give instructions, and on what conditions.
- Reserved and consent powers. Anything that needs the approval of a protector, enforcer or the settlor before it happens.
- Trustee decision-making. Unanimity, majority, quorum and the treatment of conflicted trustees.
Deeds are often varied over time by supplemental deeds, deeds of appointment and retirement, and deeds adding or excluding beneficiaries. The current position is the original deed read together with every later document. A provider reviewing the trust at onboarding will ask for the full chain, because a single missing deed of variation can change who is entitled to sign.
Where settlors and beneficiaries fit
The settlor created the trust and transferred assets into it. Once that transfer is complete, the settlor normally has no right to direct the trustees, unless the deed reserves a specific power. Some deeds do reserve powers to the settlor, such as a power to direct investments or to appoint and remove trustees. Where that is the case, the power is personal and limited to its terms. A reserved investment power does not let the settlor ask for a distribution to a friend.
Beneficiaries are in a similar position. A discretionary beneficiary has a hope of benefiting and a right to have the trustees consider their interests properly. They cannot instruct the trustees to pay them, and a provider will not accept an instruction from a beneficiary on a trust account unless the deed, or a valid delegation from the trustees, gives that person authority.
Requests from settlors and beneficiaries are still common and perfectly legitimate as requests. The correct route is for the request to go to the trustees, for the trustees to consider it and record their decision, and for the trustees then to instruct the payment. Where a settlor or beneficiary emails the provider directly, the provider should refer them back to the trustees.
Protectors and consent powers
Many offshore trusts appoint a protector, who sits outside the trustee body and holds specific powers. Common examples are a power to remove and appoint trustees, a power to consent to distributions above a threshold, and a power to approve changes of governing law. A protector does not normally give payment instructions. Their role is to approve or veto certain acts of the trustees.
Where the deed makes a payment subject to protector consent, the trustees should obtain written consent before instructing. A provider may ask to see that consent for larger or unusual payments, particularly capital distributions. It helps to agree at onboarding which kinds of payment need consent, so that the trustee knows in advance what evidence will be expected. Our separate guide to the role of a trust protector covers this in more depth.
Corporate trustees and authorised signatories
Professional trustees are usually companies, and a company acts through people. The provider needs to see the corporate trustee's own authority: its constitutional documents, a register of directors and a board resolution or signing policy naming who may instruct on behalf of the company in its capacity as trustee of the specific trust.
Corporate trustees commonly operate with signing classes, for example any two signatories, or one A signatory with one B signatory. The account mandate should reflect that structure, and a good client platform can enforce it through dual authorisation so that one person enters a payment and another approves it. When signatories leave the trust company, their access should be removed promptly and the provider told in writing.
Private trust companies, which act for a single family, follow the same logic, with the added step of identifying who owns and controls the PTC itself. See our guide to private trust companies.
Distributions to beneficiaries
A distribution is a payment of trust income or capital to a beneficiary. For a discretionary trust it is the moment at which a hope becomes a benefit, so it receives particular attention. The trustee should hold a written resolution recording the decision, the amount, the beneficiary and the reasons, together with any consent required under the deed.
Canadian anti-money laundering rules require a money services business to obtain the names and addresses of a trust’s trustees, known beneficiaries and settlors, and to take reasonable measures to confirm that information. Many providers also identify any protector because of the control that role carries. Where beneficiaries are described only as a class, a provider will usually want to identify a beneficiary once that person becomes known, which in practice is often when they receive a distribution. So if a trust pays a beneficiary who was not previously identified, expect the provider to ask for that person's identity documents before or alongside the payment.
The recipient account should be in the beneficiary's own name. Payments to a third party on a beneficiary's behalf, such as school fees or medical bills, are possible where the deed allows, but the trustee should be ready to explain the link and show supporting invoices. For several beneficiaries paid at once, see discretionary trust distributions.
Paying trust expenses and third parties
Not every payment is a distribution. Trusts pay lawyers, accountants, property managers, insurers, tax authorities and their own trustees. These payments rely on the administrative powers in the deed and on ordinary commercial evidence. An invoice addressed to the trustee, for services to the trust, at a level consistent with the work, is usually enough.
Payments to underlying companies owned by the trust deserve a little more care. Funding a holding company to buy property is an investment decision, and the trustee should minute it. Repeated small transfers to a company controlled by a beneficiary may look like disguised distributions, and a provider may ask questions if the pattern does not match what was described at onboarding.
Trustee fees paid from the trust to the trustee company are normal. They should match the fee agreement and be visible in the trust accounts.
Documents a payments provider will ask for
Expect a provider to ask for most of the following when a trust account is opened, and to refresh them periodically:
- The trust deed and all supplemental deeds, appointments, retirements and variations.
- Identification of each trustee, and for a corporate trustee its incorporation documents, directors and authorised signatories.
- Identification of the settlor, the protector, named beneficiaries and anyone else with control.
- A source of wealth explanation for the assets settled, and source of funds for incoming transfers.
- The expected pattern of activity: currencies, countries, typical payment sizes and counterparties.
- A trustee resolution opening the account and approving the mandate.
Certified copies are usually needed for identity and constitutional documents. A provider may accept a trustee's certificate summarising the deed in place of the full document, but many will still want to read the clauses on powers and beneficiaries.
Worked examples
A capital distribution with protector consent. Two individual trustees of a Cayman trust decide to advance capital to an adult beneficiary for a house purchase. The deed requires protector consent above a set amount. The trustees sign a joint resolution, obtain the protector's signed consent, and instruct the payment. The beneficiary has not received anything before, so the provider asks for the beneficiary's identification and proof of address. Once those are on file, the payment is released to the beneficiary's own account.
A settlor asks for a payment. The settlor emails the provider asking for a transfer from the trust to a supplier for renovations at a family property. The provider replies that it can only act on trustee instructions. The settlor contacts the trustee, who checks that the property is held by a trust-owned company, confirms the invoice, and instructs a payment from the company's account, which is where the expense belongs.
A corporate trustee with a departing signatory. A trust company's director resigns. The company passes a resolution updating its signatory list and sends it to the provider. The departing director's platform access is revoked the same day, and pending payments she had entered are reviewed and re-approved by remaining signatories.
Common mistakes that delay payments
- Sending instructions from an individual who is not on the mandate, often a family member or adviser acting informally.
- Missing a deed of appointment, so the provider's records show a former trustee as still in office.
- Paying a beneficiary who has never been identified, with no documents prepared in advance.
- Forgetting protector consent where the deed requires it.
- Paying an account held in a name that differs from the beneficiary or supplier described.
- Describing a payment vaguely, for example as a transfer, when the provider needs to know whether it is a distribution, an expense or an investment.
Each of these is easy to avoid with a short internal checklist run by the trustee before instructing.
General information only
This article is general information about how trust payments are commonly handled. It is not legal or tax advice, and the terms of each trust deed and applicable law will govern any specific case. Trustees should take advice from their own lawyers where the position is unclear.
Our page on trusts and their trustees explains what CCYFX asks for when a trust structure is involved.
