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A trust is a legally enforceable right in property (be it money, personal belongings, real estate, or any thing or right that is transferable) that is held in legal control of one person for the benefit of another person.

A parent, for example, might hold a family home in trust for their child with full ownership of that home passing to the child, the beneficiary, at a specified time or, more often, upon the death of the parent, the trustee.

A Brief History

The idea of trusts dates back to the 16th Century when English landowners, seeking ways to lessen their burdens to creditors and feudal tenants, legally transferred title to some of their assets to designated third parties. The landowners maintained physical control of the assets while reducing the amount of wealth they could be claimed to have legal title to (and thereby reducing tax burdens and the amounts creditors could try to seize). The idea outlived feudal times is an excellent way of managing and regulating wealth, debt, and inheritances that continues to this day.


Types of Trusts

A trust provides for several legal protections for property. Besides providing safeguards for the beneficiaries (protecting the assets from being stolen or liquidated before they can be passed down), a trust can help put off, or in some cases avoid altogether, some tax burdens. Trusts can also provide a legal framework within which individuals can better control property and even make sure that specified social, charitable, or commercial goals for the property are met and maintained.

Trusts are most often defined by their relationship to the life of the person providing the property to be held in trust: the trustor (who can also be one and the same as the trustee; the trustor donates the property to the trust, the trustee holds legal title to the property, the beneficiary receives the benefit of the property).

Living trusts are created while the trustor is alive; testamentary trusts are included as part of a will and created after the death of the trustor. A testamentary trust might be created, for example, to establish a charitable foundation or to safeguard the assets of minor children until they reach the age of majority.

Charitable trusts can be established that both benefit the public (as specified in the trust) and the trustee, in terms of tax benefits and the like. Insurance trusts can protect the assets of business partnerships and other similar entities by providing for a smooth transition in case of the loss of a key partner.

Both living trusts and testamentary trusts may be created to be revocable under certain circumstances but this must be explicitly laid out when the trust is being created or, in most cases, the trust will legally be considered to be irrevocable.

As laws vary from jurisdiction to jurisdiction, the location of a trust can be a big determining factor in matters such as taxes, administration fees, and the ability of the trust to be challenged in a court of law. Trusts are sometimes extremely complicated and almost always require the services of a lawyer who is well versed in matters related to trusts and estates, for all parties entering into one.

By Michael Willis           


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