TRUST
A trust is a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of another. A valid express trust requires: a settlor with capacity, a present transfer of property (the res), a trustee, an ascertainable beneficiary, and a lawful purpose. The trustee holds legal title; the beneficiary holds equitable title.
A trust is a legal arrangement in which one person holds property for the benefit of another. The person who holds it — the trustee — has legal title. The person who benefits — the beneficiary — has the equitable interest. The person who created it — the settlor — set the terms.
Someone put property in a box, gave the box to a manager, and told the manager: this is not yours — run it for someone else.
CONNECTED DOES NOT MEAN IDENTICAL.
A will transfers property at death through probate. A trust can operate during life and at death, and typically avoids probate. A testamentary trust is created by a will — so a will can contain a trust, but they are not the same thing.
A contract creates mutual obligations between parties who both agree. A trust is a unilateral arrangement — the settlor imposes duties on the trustee. The beneficiary need not agree to, or even know about, the trust at creation.
A gift transfers ownership outright and immediately. A trust transfers legal title to the trustee while retaining equitable title in the beneficiary. After a gift, the donor has no further control. After a trust, the trustee has ongoing duties.
The trustee holds legal title — the formal ownership recognized by courts of law. The beneficiary holds equitable title — the beneficial interest recognized by courts of equity. Both are real property interests. Neither is superior in the abstract; they serve different functions.
Sci-Finance analytical terminology. Not statutory or conventional legal terminology.
Settlor (creator), Trustee (legal title holder and manager), Beneficiary (equitable interest holder). A fourth party — the trust protector — may exist in modern drafting.
The settlor must manifest a present intention to create a trust, not merely a future intention or a moral obligation. Precatory language ('I hope you will use this for...') does not create a trust.
The trust must have a lawful purpose. A trust created to defraud creditors, to accomplish an illegal act, or against public policy is void or voidable.
The trust res — the property subject to the trust — must be identifiable and transferred to the trustee. A trust of future property or an unidentified res fails for want of subject matter.
Things placed near one another may have a meaningful relationship without becoming the same Thing.
A beneficiary near property is not necessarily its titleholder.
A trustee near a beneficiary is not necessarily acting in the beneficiary's capacity.
A document near an asset does not itself prove conveyance of that asset.
A person appearing beside an institution does not thereby acquire that institution's authority.
The same natural person may occupy more than one capacity. Authority must be traced to the capacity relevant to the particular act.
Property owner with legal capacity to transfer
Ownership of the res; legal capacity (age, mental competence)
Create the trust by transferring the res to the trustee with intent to create a trust relationship
Fiduciary — legal title holder
Trust instrument; acceptance of trusteeship
Manage, invest, and distribute trust property according to the trust terms and applicable law; must act in the interest of the beneficiary
Equitable interest holder
Trust instrument; designation by settlor
Receive distributions; enforce the trust; in some trusts, consent to modification or termination
Do not stop because a document exists. Ask what legally or economically changed.
Before the trust: the settlor owns the property outright. After the trust is created: legal title passes to the trustee, equitable title vests in the beneficiary, and the settlor (unless also a beneficiary) no longer has a beneficial interest. The property is now subject to fiduciary duty. The trustee cannot use it for personal benefit. The beneficiary can enforce the trust in court. The property may be shielded from the trustee's personal creditors (it is not the trustee's property). If the trust is irrevocable, it may also be shielded from the settlor's creditors.
Grandma Rosa owns a brownstone in Brooklyn. She creates a revocable living trust, transfers the brownstone into it, names herself as trustee during her lifetime, and names her two grandchildren as remainder beneficiaries. While Rosa is alive and competent, she manages the property as trustee. When she dies, the successor trustee — her attorney — distributes the brownstone to the grandchildren according to the trust terms. The brownstone never goes through probate. The grandchildren receive it directly. Rosa's creditors cannot reach it after her death because it passed outside her estate.
This hypothetical illustrates the questions a reader should investigate. It does not provide individualized legal advice or jurisdiction-specific legal conclusions.
A trust is a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of another. A valid express trust requires: a settlor with capacity, a present transfer of property (the res), a trustee, an ascertainable beneficiary, and a lawful purpose. The trustee holds legal title; the beneficiary holds equitable title.
Citations are provided for reference only. The Institute does not fabricate citations, cases, statutes, quotations, or URLs. If verified primary-source material has not been supplied, the entry shows SOURCE REVIEW PENDING.
Vel Xenon Legal Information Institute provides general legal information and educational material, not individualized legal advice. Law varies by jurisdiction and changes over time. Consult the underlying authorities and, when appropriate, a qualified professional for advice concerning a particular situation.