Equity & Trust

Trusts are arrangements whereby assets, money or property is owned and managed by a single individual for the benefit of another. Trusts are created by someone called in legal terms a settlor, who entrusts some or all of his assets to a person or people of his or her choice, known as trustees. Trustees legally own the trust property, but they are legally required to hold the property for the benefit of one or more individuals or organisations, known in law as beneficiaries. A document known as the trust document, usually written and in deed form, governs the terms of the trust.

Trusts are an ancient law, developed in England during the Crusades. At this time, when a landowner left the country to fight in the Crusades, he would convey his lands to a friend who would hold the land until the Crusader returned. This caused complicated situations, and at the time was not recognised in English law. Over time this was rectified, and crusaders were beneficiaries and the holder of the land would be a trustee.

Since this time, trusts have grown into one of the most effective parts of English law, and property of any sort can be held in trust. Trusts may be created during life, or even after death in a Will, and may be either written or implied. Trusts generally require three things: intention, subject matter and an object. Trustees can be either companies or individuals, and there may be multiple trustees. Trusts can be created without any knowledge on the part of the trustees, and being a trustee by its nature is unpaid. However, some professional trustees (such as lawyers) cannot afford to work for free, and the trust document can specify payment.

The beneficiaries are the beneficial owners of the trust property, and will at some point receive income from the property or the property itself. The level and extend of beneficiaries interest depends on the trust document.

UK trusts are generally in one of the five following forms. Interest in Possession trusts are usually part of a will and leave a spouse able to draw income for the rest of his or her life. Accumulation and Maintenance trusts exist for young beneficiaries and allow them to receive money if the trustees agree. Discretionary trusts usually leave the trustees to choose the beneficiaries. Bare trusts allow the beneficiaries to demand any or all property at any time. Charitable trusts encourage charitable giving and are unique in English law.

Trusts are private, prevent spending, help in wills and estate planning, charitable giving, investment, pension, asset protection and tax planning. Trust law governs all aspects of the trust.