A trust is a legal relationship whereby a person called trustee undertakes the obligation to deal with property over which he has control (called the trust property) for the benefit of persons called beneficiaries of whom he may himself be one. Generally, all kinds of property, real or personal and tangible or intangible may be held in trust; the property most frequently so held include land, stocks and shares. A trust generally involves separation of the management from the beneficial enjoyment of property although in civil law jurisdictions, this can occur only when a person is incompetent to manage his own affairs because of absence, age or unsound mind.
Elements of a trust
- Settlor: The settlor is so called because early trusts in England were created in marriage and other settlements. He is the person who owns property and goes through the acts necessary to create a trust of it.
- Trust property: There can be no trust without identified property to which the trust is to attach which is called the trust property or subject matter. It may consist for example of real property, stocks bounds, mortgages, insurance, policies, a bank account or real estate.
- Trustee: Although a trustee is not necessary in order that a trust be created (the court will supply one if none is named by the settlor, the trust cannot be carried out without some person in whom title to the trust property can be invested and who can perform the acts, of trust administration.
- Beneficiaries: No private trust can exist without beneficiary who are identifiable legal entities (natural persons or corporations) or a class of persons (such as children of the settler).
- Trust instrument: The trust instrument is the document in which the settlor expresses his intent to have a trust and describes its provisions. It usually consists of a deed or a will.
- Express trust: An express trust arises as a result of the deliberate act of the creator of the trust. It is an equitable institution for which no particular form is generally required so long as the intention to create a trust is plainly manifested.
- Implied trust: A number of trust come into existence as a consequence of the operation of equitable presumptions. They are therefore trusts implied by law. Thus, if “A” provides the purchase money for a house and the conveyance is taken in the name of “B” then in the absence of any expressed intention, the law implies that “B” holds as a trustee for “A” [unless “A” is the father or husband of “B”, in which case there is a presumption that “A” wished to confer a benefit on “B”].
- Family provision: A settlor provides machinery for the successive members of the family with the permission of the law. Trust arising by will is common and often take the form of a trust for sale. By such a trust, the trustees are directed to sell all the testator’s assets to pay his debts and/or to invest the proceeds in income-bearing trustee securities for the beneficiaries. The dominating motive in establishing a family trust is to give financial security to one’s close relatives.
- Social functions: A very wide variety of social and public purposes may be achieved by way of trusts. Social clubs, trade unions, philanthropic organisations and similar ones commonly hold their property in this way; the trustee representing the institution so far as the outside world is concerned. The most important within this class is the charitable trust.
- Commercial functions: In modern times, trust has been used increasingly in a variety of ways in commercial life. A principal service of trust companies for business corporations, for example, is to act as trustees for their corporations as trustees for their bond issues.
