A trust is a formal
arrangement for property management, in the manner of an
owner, by another.
A trust is related to "trust" in the
ordinary sense of relying on another. A trust is a
formal arrangement for property management, in the
manner of an owner, by another. The management of the
property is according to the original owner's
directions.
THE TRUST RELATIONSHIP
A trust is a legal relationship between
the original owner of the property, the manager, and the
person or persons who benefit. The original owner is
known as the grantor, settlor, or trustor. The manager
is known as the trustee. The person who benefits is
known as a beneficiary. Persons who benefit are known as
beneficiaries.
THE ORIGIN OF THE TRUST
Until 1535, in England, taxes collected on estates where
enforced by the law courts, as long as the owner had
both legal title (the right to transfer) and equitable
title (possession and use). The equitable title was also
known as the beneficial interest.
English lawyers saw that taxes collected on estates
could be avoided by separating the ownership of property
by transferring just the legal title or the equitable
title. Thus, landowners would sometimes transfer their
property to a legal title holder to have and hold for
the use of a beneficiary, also known as the cestui que
use ("one who uses"). English court's upheld the promise
between the grantor and the legal title holder that the
latter would hold the property for the cestui que use.
Such "uses" were often given to children who could not
otherwise hold legal title.
The use of split title--the separation of legal title
and equitable title--as an tax loophole was closed by
the 1535 Statute of Uses. Equitable title was equated
with legal title so as to make equitable title owners
subject to the taxes collected on estates.
More importantly, the idea of split title was permitted
to remain. The trust was born.
SINCE 1535
Since 1535, trust techniques have been
applied to both real and personal property. Because
trust matters were considered matters of equity,
decisions about them where made by England's equity
courts. Today, trust matters are still regarded as
matters of equity. Disputes are decided on equity
principles without a jury.
Copyright 2006 LexisNexis, a
division of Reed Elsevier Inc.
