Trust law is a legal framework where property is controlled by a trustee for the benefit of a beneficiary. It covers how trusts are created, owned, regulated, and what happens to the property. Trusts developed in England during the Crusades and are regulated by the Trust Act. Trusts can be used for estate planning, charitable giving, and tax planning. Different types of trusts exist, including express trusts and dynasty trusts. Trusts can also be divided into shares and allocated to beneficiaries. The purpose of trust law is to allow an owner to control their property for the benefit of others.
Trust law is the legal framework where property is assigned to an entity called a trust and where that property is controlled by one person for the benefit of someone else. The controller of the trust is usually called a trustee in the United States and settlor in many other English-speaking common law nations. The property in the trust is administered on behalf of a third party, who is usually called a beneficiary. Trust law covers how trusts are created, own the property, regulate the use of the property and decide what ultimately happens to the property in them.
Trusts in the modern sense are believed to have developed in the 1100s in England during the Crusades. Feudal lords transferred authority over estates to another person while they were away fighting so that the business of the lord’s enterprises could continue. There was no legal framework to require the retransfer of land upon the return of the lord. If there were disputes, they were typically resolved in court in favor of the feudal lord, and over time a framework evolved for lands to be held in trust for the benefit of the lord.
The Trust Act regulates the establishment of a trust, which can be entered into orally or in writing, during the life of the owner or by will, or by order of a court. Every trust has conditions, also governed by the Trust Act, which spell out who the trustee is, who the beneficiary is and what the trustee is expected to do with the property held in trust. A variety of purposes for ownership are covered under trust law and include estate planning, controlling how quickly inherited or donated property can be disposed of, charitable giving, and tax planning to name a few.
An express trust is a common form of trust where the owner of a property expressly states what will happen to the property held, but increasingly complex situations are covered by trust law as it has evolved. A dynasty trust allows one generation of property owners not to the next generation but to skip one and leave it to their grandchildren or great-grandchildren.
A mutual fund is divided into shares, the value of which rises and falls with the value of the underlying trust asset, and which can be allocated to beneficiaries participating in the trust’s distributions based on the number of shares held. Many other types of trusts have also been developed, but in general the purpose of trust law is to give an owner the ability to control what happens to his property through another person for the benefit of others.
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