User:Tomatoswoop/Trust Law
Three-party fiduciary relationship / From Wikipedia, the free encyclopedia
A trust is a relationship whereby property is held by one party for the benefit of another. Trusts are primarily found in common law systems, however their success has led some civil law jurisdictions to incorporate trusts into their civil codes. The trust is governed by the terms under which it was created. In most jurisdictions, this requires a contractual trust agreement or deed.
This article may be too technical for most readers to understand. (January 2021) |
This article's lead section may be too long. (January 2021) |
A trust is created by a settlor, who transfers some or all of his or her property to a trustee. The trustee holds that property for the trust's beneficiaries. In some types of trust, the same person may fall into more than one of these roles[1].
An settlor placing property into trust turns over part of their bundle of rights to the trustee This may be done for a number of reasons: to take care of the property if the settlor is absent, incapacitated, or deceased; for tax avoidance; to give the benefit of an investment to someone without the responsibility of managing it (e.g. a child trust fund); or any number of other reasons (see § Purposes).
The trustee is given legal title to the trust property, but is obligated to act for the good of the beneficiaries. The trustee may be compensated and have expenses reimbursed (according to the terms of the trust set out in the deed or contract), but otherwise must turn over all profits from the trust properties. These (and other) legal responsbilities are known as fiduciary duties, and the trustee is, as such, a fiduciary. Any violation of these strict responsbilities (for example an undisclosed conflict of interest, or self-dealing) is known as a breach of trust, and punishable by law.
Holding Bay:
Binnage:
A trust in the United States may be subject to federal and state taxation.
A testamentary trust is created by a will and arises after the death of the settlor. An inter vivos trust is created during the settlor's lifetime by a trust instrument. A trust may be revocable or irrevocable; in the United States, a trust is presumed to be irrevocable unless the instrument or will creating it states it is revocable, except in California, Oklahoma and Texas, in which trusts are presumed to be revocable unless the instrument or will creating them states they are irrevocable. An irrevocable trust can be "broken" (revoked) only by a judicial proceeding.
The trustee is the legal owner of the property in trust, as fiduciary for the beneficiary or beneficiaries who is/are the equitable owner(s) of the trust property. Trustees thus have a fiduciary duty to manage the trust to the benefit of the equitable owners. They must provide a regular accounting of trust income and expenditures. Trustees may be compensated and be reimbursed their expenses. A court of competent jurisdiction can remove a trustee who breaches his/her fiduciary duty. Some breaches of fiduciary duty can be charged and tried as criminal offences in a court of law.
Trusts have existed since Roman times and have become one of the most important innovations in property law.[2] Trust law has evolved through court rulings differently in different states, so statements in this article are generalizations; understanding the jurisdiction-specific case law involved is tricky. Some U.S. states are adapting the Uniform Trust Code to codify and harmonize their trust laws, but state-specific variations still remain.
Testamentary trusts may be created in wills, defining how money and property will be handled for children or other beneficiaries.