A Trust1 involves the separation of the legal title,
or ownership, of property from the right to benefit from that
property. It involves a person (the "settlor")
transferring property (the "trust fund") to another (the
"trustee") to hold for the benefit of another person or
purpose (a "beneficiary"). A typical trust structure may
look something like the following:
It is a useful and practical concept that has been around for
centuries. Both the Romans and early Islamic societies developed
similar structures, but it is England, and its affiliated Crown
Dependencies and former commonwealth countries that have been at
the forefront of the development of trusts.
Historically, trusts were used as a way of delegating the
responsibility for looking after a property to one person whilst
dictating that another had the right to benefit from it either
immediately or at some point in the future. Thus medieval knights
would leave their estate to a trusted friend to look after for the
benefit of their family whilst they went on crusade on the
understanding that, if they returned the property would be returned
to them, but if they didn't, it would pass to their family.
The law developed to enforce this arrangement on the basis that
it was not "equitable" (i.e "fair") to allow
the trusted friend to walk off with the property unchecked.
Nowadays, although a trust can still be established orally or by
conduct most trusts are formally established in a written
instrument and are additionally governed by local law (such as The
Trusts (Guernsey) Law, 2007).
The last paper in the Advanced Series looks in more detail at
the Origins and future of the trust.
1In modern usage the terms "trust"
and "settlement" are used interchangeably.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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