Trusts

A trust is a legal arrangement in which property is held by one party (the trustee) for the benefit of others (the beneficiaries). The arrangement is created by a settlor and is typically formalized in a trust deed or by will. The trustee has fiduciary duties to manage the property and to distribute it according to the terms of the trust.

Elements commonly required include an intention to create the trust, a transfer of property to the trustee, identifiable or ascertainable beneficiaries, and a valid, lawful purpose. When property is placed in the trust, the trustee holds legal title to the assets while the beneficiaries hold equitable or beneficial interests.

Types include express trusts, which arise from explicit words in a deed or will; living or inter vivos trusts created during the settlor’s lifetime, and testamentary trusts created by will. Trusts can be revocable (modifiable or terminable by the settlor) or irrevocable; discretionary trusts (where the trustee may decide distributions) or fixed trusts (distributions are predetermined). Charitable trusts are established for charitable purposes and often receive special legal treatment.

Administration involves the trustee exercising powers to manage investments, make distributions, and keep accounts. Trustees must act in the best interests of beneficiaries, avoid conflicts of interest or self-dealing, and comply with the trust terms and applicable law. A trust can terminate when its purpose is fulfilled, the terms expire, or assets are distributed; modifications may be possible by agreement of beneficiaries or by court orders, particularly for charitable trusts.

Tax and regulation vary by jurisdiction. In many systems, trust income may be taxed at the trust level or attributed to beneficiaries. Trusts can offer privacy and asset-management benefits but also pose risks, such as potential breaches of fiduciary duties or creditor exposure in some cases.