Law of Trusts

[shikamaru]

My intent for this thread is usage as a learning tool as well as aid to others in understanding trusts at a deeper level: a provision for newbies and non-newbies alike if you will.

http://en.wikipedia.org/wiki/Trust_law

In common law legal systems, a trust is a relationship whereby property (including real, tangible and intangible) is managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a settlor (or feoffor to uses), who entrusts some or all of their property to people of their choice (the trustees or feoffee to uses). The trustees hold legal title to the trust property (or trust corpus), but they are obliged to hold the property for the benefit of one or more individuals or organizations (the beneficiary, cestui que use, or cestui que trust), usually specified by the settlor, who hold equitable title. The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property.

The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust document and the governing law.

In the United States, the settlor is also called the trustor, grantor, donor or creator. In some other jurisdictions, the settlor may also be known as the founder.

History of Trusts

The trust law developed in England at the time of the Crusades, during the 12th and 13th centuries.

At the time, land ownership in England was based on the feudal system. When a landowner left England to fight in the Crusades, he needed someone to run his estate in his absence, often to pay and receive feudal dues. To achieve this, he would convey ownership of his lands to an acquaintance, on the understanding that the ownership would be conveyed back on his return. However, Crusaders would often return to find the legal owners' refusal to hand over the property.

Unfortunately for the Crusader, English law did not recognize his claim. As far as the courts were concerned, the land belonged to the trustee, who was under no obligation to return it. The Crusader had no legal claim. The disgruntled Crusader would then petition the king, who would refer the matter to his Lord Chancellor. The Lord Chancellor could do what was "just" and "equitable", and had the power to decide a case according to his conscience. At this time, the principle of equity was born.

The Lord Chancellor would consider it unjust that the legal owner could deny the claims of the Crusader (the "true" owner). Therefore, he would find in favor of the returning Crusader. Over time, it became known that the Lord Chancellor's court (the Court of Chancery) would continually recognize the claim of a returning Crusader. The legal owner would hold the land for the benefit of the original owner, and would be compelled to convey it back to him when requested. The Crusader was the "beneficiary" and the friend the "trustee". The term use of land was coined, and in time developed into what we now know as a trust.

Also, the Primogeniture system could be considered as a form of trust. In Primogeniture system, the first born male inherited all the property and "usually assumes the responsibility of trusteeship of the property and of adjudicating attendant disputes." [1]

Roman law recognized a similar concept which it referred to as the fideicommissum.[2]

The waqf is an equivalent institution in Islamic law.

"Antitrust law" emerged in the 19th century when industries created monopolistic trusts by entrusting their shares to a board of trustees in exchange for shares of equal value with dividend rights; these boards could then enforce a monopoly. However, trusts were used in this case because a corporation could not own other companies' stock[3]:447 and thereby become a holding company without a "special act of the legislature".[4] Holding companies were used after the restriction on owning other companies' shares was lifted.[3]:447

Creation and Formalities of Trusts

Creation

Trusts may be created by the expressed intentions of the settlor (express trusts) or they may be created by operation of law (resulting trusts).

Typically a trust is created by one of the following:

1. a written trust document created by the settlor and signed by both the settlor and the trustees (often referred to as an inter vivos or "living trust");
2. an oral declaration;[8]
3. the will of a decedent, usually called a testamentary trust; or
4. a court order (for example in family proceedings).

In some jurisdictions certain types of assets may not be the subject of a trust without a written document.[9]
[edit] Formalities

Generally, a trust requires three certainties, as determined in Knight v Knight:

1. Intention. There must be a clear intention to create a trust (Re Adams and the Kensington Vestry)
2. Subject Matter. The property subject to the trust must be clearly identified (Palmer v Simmonds). One may not, for example, settle "the majority of my estate", as the precise extent cannot be ascertained. Trust property may be any form of specific property, be it real or personal, tangible or intangible. It is often, for example, real estate, shares or cash.
3. Objects. The beneficiaries of the trust must be clearly identified, or at least be ascertainable (Re Hain's Settlement). In the case of discretionary trusts, where the trustees have power to decide who the beneficiaries will be, the settlor must have described a clear class of beneficiaries (McPhail v Doulton). Beneficiaries may include people not born at the date of the trust (for example, "my future grandchildren"). Alternatively, the object of a trust could be a charitable purpose rather than specific beneficiaries.

More to come. Any and all contributions welcome.