What Is the Legal Status of a Trust

Trusts are created by settlors (a person and their lawyer) who decide how to transfer some or all of their assets to the trustees. These trustees record the assets of the beneficiaries of the trust. The rules of a trust depend on the conditions under which it was built. In some areas, older beneficiaries may become trustees. For example, in some jurisdictions, the grantor may be both a lifetime beneficiary and a trustee. The assets of a trust benefit from an increase in the base, which can mean significant tax savings for heirs who eventually inherit the trust. In contrast, assets that are simply donated during the owner`s lifetime usually have their original cost base. A healthy person under the age of 55 probably doesn`t need living confidence, as it takes a lot of time and energy to maintain trust. Marriage can also be a factor in deciding whether or not to form a living trust. When married couples plan to leave their property to each other, there are mechanisms for a simple transfer of assets after the death of a spouse. Finally, the size of the property is also a factor in whether it is a good idea to create a living trust. Small estates usually have no problem going through the estate process, making a living trust unnecessary. Roman law had a well-developed concept of trust (fideicommissum) in relation to “testamentary trusts” created by wills, but never developed the concept of inter vivos (living) trusts that apply during the life of the Creator.

This was created by later common law jurisdictions. The right of personal trust developed in England at the time of the Crusades in the 12th and 13th centuries. In medieval English trust law, the settlor was known as feoffor to uses, while the trustee was known as feoffee to uses and the beneficiary was known as cestui que use or cestui que trust. Since many people do not establish trusts or execute wills, crown inheritance law is an important addition to trust and estate law. They determine where a person`s property goes after their death in the absence of a will. There are strong restrictions on a trustee in a conflict of interest. Courts can set aside a trustee`s actions, order the return of profits, and impose other penalties if they determine that a trustee has failed to perform any of his or her duties. Such a breach is called a breach of trust and can impose heavy responsibilities on a negligent or dishonest fiduciary for his or her failures. Settlors and trustees are strongly advised to consult with qualified legal counsel before entering into a trust agreement.

In South Africa, in addition to living trusts and traditional testamentary trusts, there is a “Bewind Trust” (inherited from the Romano-Dutch Bewind, which is managed by a Bewindhebber)[40], where the beneficiaries own the assets of the trust, while the trustee manages the trust, although this is not considered a trust under modern Dutch law. [41] Bewind Trusts are created as trading vehicles that offer limited liability and certain tax benefits to trustees. [Citation needed] A revocable trust may be modified or terminated by the trustee during his or her lifetime. An irrevocable trust, as the name suggests, is a trust that the trustee cannot change once established, or a trust that becomes irrevocable upon death. Although the trustee is transferred to the legal ownership of the trust`s assets, he owes a number of fiduciary duties to the beneficiaries when accepting the assets. The main obligations include the duty of loyalty, the duty of prudence and the duty of impartiality. [4] Trustees may be held to a very high standard of care in their relationships in order to enforce their conduct. In order to ensure that beneficiaries retain their rights, trustees are subject to a number of ancillary obligations to support core tasks, including openness and transparency obligations, as well as retention, accounting and disclosure obligations. In addition, a trustee has a duty to know, understand and comply with the terms of the trust and the relevant legislation. The trustee may be compensated and reimbursed for expenses, but must remit all profits from the assets of the trust. Trusts may be created by the express intentions of the settlor[11] or they may be created by operation of law, known as implied trusts. An implied trust is a trust created by an equity court based on the actions or circumstances of the parties.