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What is a Trust?

Definition of a "Trust" :


"A legal title to property held by one party for the benefit of another. . . ." (American Heritage Dictionary,4th ed).


“A fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary”  (from investopedia.com)



Good things about trusts:


Trusts have become popular because, in many cases they are far superior to a will.  They avoid probate, avoid federal estate taxes, are harder to challenge in court than a will (at least in regard to living trusts because, unlike a will, a living trust is already being administered during your lifetime with your approval), and they provide conservatorship rights (you can name a person to make your important heathcare and other decisions if you are incapacitated).  


Bad things about trusts:


The "trust" constitutes a form of property ownership which is antithetical to American concepts of private property.


The goals of the trust for the most part can be accomplished by other means which are less complex, less subject to varying interpretations, and therefore, less of a windfall for the lawyer industry. And, in the case of spendthrift trusts - which are of questionable consitutionality and contrary to public policy - there is a more pressing need for change.

In essence, the Anglo-American trust is a “social institution”, an “appropriation of property” (see article  here) antithetical to the idea of private ownership and to American concepts of private property.  Their unnatural nature and legal complexities means trust law is a

big moneymaker for the lawyer industry.  


TRUSTS IN GENERAL


The Anglo-American Trust is a unique “social” institution. Complexities arise immediately in dealing with trusts, because the trust is itself a unique manner of property ownership.


“. . . trusts are the most amazing part of the Anglo-American Law for the Civil Law jurist.” (LePaulle, An Outsider’s View Point of the Nature of Trusts, 14 Cornell Law Quarterly (1928-1929) p. 52-61


Its unnatural nature and the legal complexities which arise from this institution combine to make trust law a big moneymaker for the lawyer industry with no corresponding public (or private) benefit.  Survey of Law Firm Economics (Altman, Weil Pubs., New Town Square, PA, 2002) reports at chapter IV (“Compensation”) that the average (nationwide) annual compensation for law firm partners specializing in Trusts and Estates is $232,450.00 (and approx. $100,000.00 for associates).


What is a trust? Trusts are in their essence a “social institution”, an “appropriation of property”, “thoroughly different from the idea of private ownership”.   See LePaulle, An Outsider’s View Point of the Nature of Trusts, 14 Cornell Law Quarterly (1928-1929) p. 52-61.


Trusts are opposed to the law of property because property law is based on individualism. Trusts involve duties of ownership (on the trustee) which are opposed to private ownership (which is “the consecration of individualism”):


“. . .. two elements quite foreign to the idea of individual ownership are inherent to the trust; the first one is the right to follow the res in its economic transformations. The res, in case of ownership, is a concrete, definite thing, whereas, in case of trust, it is a somewhat intangible economic element that can take successively different forms . . . the object of private ownership is concrete, the object of trusts is intangible. . . . private ownership is the consecration of individualism: . . .  Ownership means freedom: even anti-social freedom . . Trusts involve the duty of preservation, of good management, of production: it has a social value by which it opposes itself to ownership. The two legal institutions have back of them two profoundly different and even opposed philosophies. . . .  We may therefore conclude on this point in saying that Anglo-Saxon countries have two different regimes for property: individual ownership and trusts.” (Outsider’s View Point at 58- emphasis added).


Therefore, mechanical application of general legal principles to trusts - as if they were governed by private property law instead of by trust law - may lead to unsound conclusions. “. . . trusts form a logical whole if one does not try to force them into frames that are not fitted for them.” (Outsider’s View Point at 61).


Often an interest in a trust is defined by a clause in the declaration of trust such as the following:


 “The beneficiaries shall take no estate nor interest in the trust property and their interests hereunder are personal property only, consisting of the right to enforce the due performance of this trust.”


In such a case then (precisely stated) the beneficiary’s interest in the trust consists of “the right to enforce the due performance of the trust”. The beneficiary's “Trust Interest” is simply a “chose in action” or “thing in action”. However, he also has something more, in addition to this.  As, for example, an income beneficiary of a trust, the beneficiary also has an equitable interest in a share of the trust income.