What Are Trusts?
It is not always easy to define exactly what a trust is.
Essentially a trust is an equitable obligation binding a person called a trustee, to deal with property over which he or she has control (the trust property), for the benefit of others who are called the beneficiaries.
The trustee may also be a beneficiary, and any one of the beneficiaries may enforce the obligation.
In law, a trust is not a separate legal entity( such as a corporation), except for specific purposes such as for income tax.
Simply put, it is a relationship where one party ( the settlor or testator in a will ) holds and administers property on certain terms ( the trusts) for the benefit of another ( the beneficiary).
Where Did They Come From?
Trusts developed in England from the times of the crusades, and continue to do so up to the present.
The law of trusts initially developed through co-operation between English barristers and the Courts, in order to avoid exorbitant taxes and to protect property for the benefit of widows and infants.
Trust settlements primary purpose then was to preserve capital, and Victorian trusts often obliged the eldest son the obligation to maintain widows, educate younger sons, and provide financial inducements for the marriage of sisters.
The entire system of trusts depended very much upon the incorruptibility of the trustee, usually the eldest son.
The Courts of Chancery gradually developed the concepts of “equity” and many of the legal principles relating to trusts were developed to protect beneficiaries against exploitation
For example, two principal rules developed very early by the Courts of Chancery were that the trustee must not profit from being trustee, and must not put him or herself in a position in which his or her interests conflict with his or her duty.
There was historical friction between the King’s representative and the Lord Chancellor who established the Courts of Equity.
The Courts of equity began to over rule the King as they had the discretion to declare that the real owner of property, in equity , ( fairness), was another person than found by the King.