Trust (law)
Sections Contest Property disposition Common types Other types Governing doctrines A trust is a legal relationship in which the owner of property, or any transferable right, gives it to another to manage and use solely for the benefit of a designated person.
This may be done for tax reasons or to control the property and its benefits if the settlor is absent, incapacitated, or deceased.
The trustee may be compensated and have expenses reimbursed, but otherwise turn over all profits from the trust and neither endebt nor riskily speculate on the assets without the written, clear permission of all adult beneficiaries.
Such a failure is a civil breach of trust and can leave a neglectful or dishonest trustee with severe liabilities.
When a landowner left England to fight in the Crusades, he conveyed ownership of his lands in his absence to manage the estate and pay and receive feudal dues, on the understanding that the ownership would be conveyed back on his return.
However, the original notion of equity goes all the way back to Aristotle and is found in book V, chapter 10 of his Ethics.
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 "governing instrument", be organized as a cooperative corporation or a limited liability corporation,[11]: 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[11] as well protection of individual spendthrifts through the spendthrift trust.
[16] 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.
[22] However, in the United States, similar to directors and officers, an exculpatory clause may minimize liability; although this was previously held to be against public policy, this position has changed.
Even under common law systems, the basic notion of a trust has been implemented in strikingly different ways.
Tax avoidance concerns have historically been one of the reasons that European countries with a civil law system have been reluctant to adopt trusts.
[40] In accordance with Section 7, a Cyprus International Trust may be formed for one or more of the following purposes: The law includes specific confidentiality obligations over the trustee, the protector, enforcer or any other person to keep information and details of the trust confidential.
This right is waived in the instances that law requires the disclosure of such information or if a judge before which a case is tried in issues a judgment to such effect.
[41] Such public disclosures are required: For a trust to be validly constituted it must be presented to the commissioner of stamp duty and a one-time payment of Euro 430 is made.
On the contrary, they rely on the regulated entity to collect, store and update this information The Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007-2018[42] introduced mandatory disclosure requirements in respects to trusts.
[43] Subject to this the following information will be required to be mandatory disclosed: The actual implementation of this law still remains to be seen however the requirements above are expressly extracted from The Prevention and Suppression of Money Laundering and Terrorist Financing Law of 2007–2018.
If the beneficiaries are not Cyprus residents then any income and profit derived from Cypriot sources will be subject to tax.
[45] This contrasts with other jurisdictions like Cyprus, the BVI, the Cayman Islands, the Isle of Man, Jersey and Gibraltar[46] which allow for non-charitable purpose trusts to be valid.
The role of the Protector (also sometimes called an enforcer) is to hold the trustees to account, which the beneficiaries would usually have the right to do.
The main way that English law supports the existence of these is by understanding them as a form of trust.
[52] Bewind trusts are created as trading vehicles providing trustees with limited liability and certain tax advantages.
The Taxation Law Amendment Act of 30 September 2009 commenced on 1 January 2010 and granted a 2-year window period from 1 January 2010 to 31 December 2011, affording a natural person the opportunity to take transfer of the residence with advantage of no transfer duty being payable or CGT consequences.
The Dodd-Frank Wall Street Reform and Consumer Protection Act changed this somewhat by not allowing these assets to be a part of (large) banks' regulatory capital.
[57] Avoiding probate may save costs and maintain privacy and living trusts have become very popular.
Legal protections that apply to probate but do not automatically apply to trusts include provisions that protect the decedent's assets from mismanagement or embezzlement, such as requirements of bonding, insurance, and itemized accountings of probate assets.
Married couples may, however, effectively double the estate tax exemption amount by setting up the trust with a formula clause.
Living trusts also, in practical terms, tend to be driven to large extent by tax considerations.
