Editing Trust (law) (section)

==Basic principles==
Property of any sort may be held in a trust. The uses of trusts are many and varied, for both personal and commercial reasons, and trusts may provide benefits in [[estate planning]], [[asset protection]], and [[tax]]es. Living trusts may be created during a person's life (through the drafting of a [[trust instrument]]) or after death in a [[will (law)|will]].

In a relevant sense, a trust can be viewed as a generic form of a corporation where the settlors (investors) are also the beneficiaries. This is particularly evident in the Delaware business trust, which could theoretically, with the language in the "[[Articles of Incorporation|governing instrument]]", be organized as a [[cooperative]] corporation or a limited liability corporation,<ref name=Hansmann1998/>{{rp|475–6}} although traditionally the [[Massachusetts business trust]] has been commonly used in the US. One of the most significant aspects of trusts is the ability to partition and shield assets from the trustee, multiple beneficiaries, and their respective creditors (particularly the trustee's creditors), making it "[[bankruptcy remote]]", and leading to its use in pensions, mutual funds, and asset [[securitization]]<ref name=Hansmann1998/> as well protection of individual [[spendthrift]]s through the [[spendthrift trust]].

===Terminology===
[[File:Chart of a trust.jpg|thumb|Chart of a trust]]
* Appointer: This is the person who can appoint a new trustee or remove an existing one. This person is usually mentioned in the trust deed.
* Appointment: In trust law, "appointment" often has its everyday meaning. It is common to talk of "the appointment of a trustee", for example. However, "appointment" also has a technical trust law meaning, either:
** the act of "appointing" (i.e. giving) an asset from the trust to a beneficiary (usually where there is some choice in the matter—such as in a discretionary trust); or
** the name of the document which gives effect to the appointment.
:The trustee's right to do this, where it exists, is called a [[power of appointment]]. Sometimes, a power of appointment is given to someone other than the trustee, such as the settlor, the protector, or a beneficiary.
* 'As Trustee For' ('''ATF'''): This is the legal term used to imply that an entity is acting as a trustee.
* [[Beneficiary (trust)|Beneficiary]]: A beneficiary is anyone who receives benefits from any assets the trust owns.
* 'In Its Own Capacity' (IIOC): This term refers to the fact that the trustee is acting on its own behalf.
* [[Protector (trust)|Protector]]: A protector may be appointed in an express, ''inter vivos'' trust, as a person who has some control over the trustee—usually including a power to dismiss the trustee and appoint another. The legal status of a protector is the subject of some debate. No-one doubts that a ''trustee'' has [[fiduciary]] responsibilities. If a ''protector'' also has fiduciary responsibilities, then the courts—if asked by beneficiaries—could order him or her to act in the way the court decrees. However, a protector is unnecessary to the nature of a trust—many trusts can and do operate without one. Also, protectors are comparatively new, while the nature of trusts has been established over hundreds of years. It is therefore thought by some that protectors have fiduciary duties, and by others that they do not. The [[case law]] has not yet established this point.
* [[Settlor]](s): This is the person (or persons) who creates the trust. Grantor(s) is a common synonym.
* Terms of the Trust means the settlor's wishes expressed in the Trust Instrument.
* [[Trust instrument|Trust deed]]: A trust deed is a legal document that defines the trust such as the trustee, beneficiaries, settlor and appointer, and the terms and conditions of the agreement.
* Trust distributions: A trust distribution is any income or asset that is given out to the beneficiaries of the trust.
* Trustee: A person (either an individual, a corporation or more than one of either) who administers a trust. A trustee is considered a fiduciary and owes the highest duty under the law to protect trust assets from unreasonable loss for the trust's beneficiaries.

===Creation===
Trusts may be created by the expressed intentions of the settlor also known as the founder ([[express trust]]s)<ref>{{cite web |url=https://www.westlaw.com/maf/wlau/app/document?docguid=I896d6d3213d411e18eefa443f89988a0&tocDs=AUNZ_CASES_TOC&isTocNav=true&startChunk=1&endChunk=1 |title=Database Access – UNSW Library }}</ref> or they may be created by operation of law known as implied trusts. An [[implied trust]] is one created by a [[court of equity]] because of acts or situations of the parties. Implied trusts are divided into two categories: resulting and constructive. A [[resulting trust]] is implied by the law to work out the presumed intentions of the parties, but it does not take into consideration their expressed intent. A [[constructive trust]]<ref>{{Cite web|url=http://www6.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1988/16.html|title=Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604 (15 June 1988)|access-date=23 September 2022|archive-date=23 September 2022|archive-url=https://web.archive.org/web/20220923053001/http://www6.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1988/16.html|url-status=live}}</ref> is a trust implied by law to work out justice between the parties, regardless of their intentions.

Common ways in which a trust is created include:
# a written [[trust instrument]] created by the settlor and signed by both the settlor and the trustees (often referred to as an ''inter vivos'' or living trust);
# an oral declaration or promise;<ref>See for example ''[[T Choithram International SA v Pagarani|T Choithram International SA and others v Pagarani and others]]'' [2001] 2 All ER 492</ref>
# the [[Will (law)|will]] of a decedent, usually called a [[testamentary trust]]; or
# 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.<ref>For example, in England, trusts over land must be evidenced in writing under s.56 of the Law of Property Act 1925</ref>

===Formalities===
{{Main|Three certainties}}
The formalities required of a trust depend on the type of trust in question.

Generally, a private express trust requires three elements to be certain, which together are known as the "three certainties". These elements were determined in ''[[Knight v Knight]]'' to be intention, subject matter and objects.<ref name="GlisterLee2015ch4">{{cite book |last1=Glister |first1=James |last2=Lee |first2=James |title=Hanbury and Martin: Modern Equity |date=2015 |publisher=[[Sweet & Maxwell]] |isbn=9780414032408 |edition=20 |chapter=Certainty and Capacity}}</ref> The certainty of intention allows the court to ascertain a settlor's true reason for creating the trust. The certainties of subject matter and objects allow the court to administer trust when the trustees fail to do so.<ref name="Doulton">{{cite court |litigants=[[McPhail v Doulton]] |vol= [1970]|reporter=UKHL 1|opinion= |pinpoint=|court=}}</ref> The court determines whether there is sufficient certainty by construing the words used in the trust instrument. These words are construed objectively in their "reasonable meaning",<ref name="Re Gulbenkian">{{cite court |litigants=[[Re Gulbenkian's Settlements Trusts]] |vol= [1968]|reporter=UKHL 5|opinion= |pinpoint=|court=}}</ref> within the context of the entire instrument.<ref name="GlisterLee2015ch4"/> Despite intention being integral to express trusts, the court will try not to let trusts fail for the lack of certainty.<ref name="Re Hays">{{cite court |litigants=Re Hay's Settlement Trusts |vol= [1981] 3|reporter=All ER 786|opinion= |pinpoint=|court=}}</ref>

# Intention. A mere expression of hope that a trust be created does not constitute the intent to create a trust. Conversely, the use of terms of art such as the word "trust" does not of itself establish whether an instrument is an express trust.<ref name="GlisterLee2015ch4"/> Disputes in this area mainly concern differentiating gifts from trusts. 
# Subject Matter. The property subject to the trust must be clearly identified (''Palmer v Simmonds''). One may not, for example state, 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 property|real]] or [[personal property|personal]], [[tangible property|tangible]] or [[intangible property|intangible]]. It is often, for example, real estate, shares or cash.
# Objects. The beneficiaries of the trust must be clearly identified,<ref name="Doulton"/> 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.

===Trustees===
A trust may have multiple trustees, and these trustees are the legal owners of the trust's property, but have a [[fiduciary]] duty to beneficiaries and various duties, such as a duty of care and a duty to inform.<ref>Edward Jones Trust Company. [http://www.edwardjones.com/groups/ejw_content/documents/document/web043726.pdf Fundamental Duties of a Trustee: A Guide for Trustees in a post-Uniform Trust Code World] {{Webarchive|url=https://web.archive.org/web/20150723180706/https://www.edwardjones.com/groups/ejw_content/documents/document/web043726.pdf |date=23 July 2015 }}.</ref> If trustees do not adhere to these duties, they may be removed through a legal action. The trustee may be either a [[natural person|person]] or a [[Juristic person|legal entity]] such as a [[company]], but typically the trust itself is not a legal entity and any litigation involving the trust must include the trustee as a party.<ref name="Moffat">{{cite book |last1=Moffat |first1=Graham |title=Trusts Law: Text and Materials |date=2005 |publisher=Cambridge University Press |location=Cambridge |isbn=9781139445283 |page=18 |edition=4th |url=https://books.google.com/books?id=EXebm5FeaIcC&pg=PA18 |access-date=20 March 2023 |archive-date=12 April 2023 |archive-url=https://web.archive.org/web/20230412073700/https://books.google.com/books?id=EXebm5FeaIcC&pg=PA18 |url-status=live }}</ref> A trustee has many rights and responsibilities which vary based on the jurisdiction and trust instrument. If a trust lacks a trustee, a court may appoint one.

The trustees administer the affairs attendant to the trust. The trust's affairs may include prudently investing the assets of the trust, accounting for and reporting periodically to the beneficiaries, filing required tax returns and other duties. In some cases dependent upon the trust instrument, the trustees must make discretionary decisions as to whether beneficiaries should receive trust assets for their benefit. A trustee may be held personally liable for problems, although fiduciary liability insurance similar to [[directors and officers liability insurance]] can be purchased. For example, a trustee could be liable if assets are not properly invested. In addition, a trustee may be liable to its beneficiaries even where the trust has made a profit but consent has not been given.<ref>{{Cite web|url=http://www.trusts.it/admincp/UploadedPDF/200801171738350.jEnghouseBoardmanPhipps19661103.pdf|title=Boardman v Phipps [1966<nowiki>]</nowiki> UKHL 2|access-date=4 March 2017|archive-date=4 August 2017|archive-url=https://web.archive.org/web/20170804220851/http://www.trusts.it/admincp/UploadedPDF/200801171738350.jEnghouseBoardmanPhipps19661103.pdf|url-status=live}}</ref> However, in the United States, similar to directors and officers, an [[waiver|exculpatory clause]] may minimize liability; although this was previously held to be against public policy, this position has changed.<ref>[http://www.americanbar.org/content/dam/aba/publications/rpte_ereport/2009/june/te_robert_sacks.authcheckdam.pdf Last Beneficiary Standing: Identifying the Proper Parties in Breach of Fiduciary Cases] {{Webarchive|url=https://web.archive.org/web/20170801145557/https://www.americanbar.org/content/dam/aba/publications/rpte_ereport/2009/june/te_robert_sacks.authcheckdam.pdf |date=1 August 2017 }}. American Bar Association, Section of Real Property, Trust, & Estate Law. 20th Annual Real Property & Estate Planning Symposia.</ref>

In the United States, the [[Uniform Trust Code]] provides for reasonable compensation and reimbursement for trustees subject to review by courts,<ref>[http://uniformlaws.org/ActSummary.aspx?title=Trust%20Code Trust Code Summary] {{Webarchive|url=https://web.archive.org/web/20180130055421/http://uniformlaws.org/ActSummary.aspx?title=Trust%20Code |date=30 January 2018 }}. Uniform Law Commission.</ref> although trustees may be unpaid. Commercial banks acting as trustees typically charge about 1% of assets under management.<ref>Schanzenbach MM, Sitkoff RF. (2007). [https://ssrn.com/abstract=868761 Did Reform of Prudent Trust Investment Laws Change Trust Portfolio Allocation?]. Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series. Paper 580.</ref>

===Beneficiaries===
The beneficiaries are beneficial (or 'equitable') owners of the trust property. Either immediately or eventually, the beneficiaries will receive income from the trust property, or they will receive the property itself. The extent of a beneficiary's interest depends on the wording of the trust document. One beneficiary may be entitled to income (for example, interest from a bank account), whereas another may be entitled to the entirety of the trust property when they attain a specified age. The settlor has much discretion when creating the trust, subject to some limitations imposed by law.

The use of trusts as a means to inherit substantial wealth may be associated with some negative connotations; some beneficiaries who are able to live comfortably from trust proceeds without having to work a job may be jokingly referred to as "trust fund babies" (regardless of age) or "trustafarians".<ref name="martinez18">{{cite book |last1=Martinez |first1=Michael J. |title=Vault Career Guide to Private Wealth Management |date=2007 |publisher=Vault, Inc. |location=New York, New York |isbn=9781581314489 |oclc=86069641 |page=18 |url=https://books.google.com/books?id=cuseaZWNAvUC&q=%22trust+fund+baby%22&pg=PA18 |access-date=21 October 2020 |archive-date=15 October 2021 |archive-url=https://web.archive.org/web/20211015160320/https://books.google.com/books?id=cuseaZWNAvUC&q=%22trust+fund+baby%22&pg=PA18 |url-status=live }}</ref>