What is a Hybrid Trust?

A Hybrid Trust is a combination of both a Discretionary and a Unit Trust.

Within a Hybrid Trust, the trustee is given the power to distribute trust income and capital among a nominated class of beneficiaries (similar to a Discretionary/Family Trust). The income and capital is distributed part in a proportional method (like a Unit Trust) relative to the number of units held by each beneficiary and part in a discretionary method.

Click here to view a diagram of a Hybrid Trust.

The Hybrid Trust has several unique features:

• The beneficiaries hold their respective interests within a defined set of classes from ordinary units to a range of special classes of units each class having its own "terms of reference".
  
• The various classes have fixed entitlements within each class so that a group of say special "A" class unit holders will have a fixed entitlement to any profit distribution which the trustee decides to pay that class.
  
• The fixed entitlement operates in a similar way to the unit trust but applies only to the money that is directed to that particular class.
  
• The Trustee has complete discretion to distribute profit to any class of unit holders but once the decision is made to distribute to a particular class or classes of unit holders then the entitlements are fixed within that class, the trustee having no discretion within that class of unit holders.
  
• The Hybrid Trust enables the trustee to pay money to certain classes and therefore obviously not to pay money to other classes of unit holders. This is a tool that can often be used for the transfer of existing assets from a person or company into a protected trust.
  
• The Trustee can issue additional units that have different "terms of issue". This facility is a major attribute of the "Hybrid Trust" as it enables the client to transfer assets from "risk" entities into a safer protected vehicle.