Types of trusts

A unit trust is a trust where units are issued in the trust to unit holders. This is how most large publicly offered managed investment funds operate. If you invest a certain amount of money, you'll receive a certain number of units in the trust, similar to holding shares in a company. Generally, based on your unit holding, you then have a right to a percentage of the trust's income and capital.

A discretionary trust doesn't have units or unit holders. Instead, the trustees have discretion as to how the trust's assets and income are distributed among the beneficiaries. This is generally suitable for family trusts, especially testamentary trusts, which house the assets of a deceased estate and provides the trustee with the discretion to distribute income in a tax effective manner among family members.

Hybrid trusts are basically a blend of a unit and a discretionary trust. The trust deed may dictate which beneficiaries can receive income and capital distributions.