In common law legal systems, a
trust is
an arrangement whereby money or property is
owned and managed by one person (or persons, or
organizations) for the benefit of another. A
trust is created by a
settlor, who
entrusts some or all of his property to people
of his choice (the
trustees). The
trustees are the legal owners of the
trust
property (or
trust corpus), but they
are obliged to hold the property for the benefit
of one or more individuals or organizations (the
beneficiary, a.k.a.
cestui que use
or
cestui que trust), usually specified
by the settlor. The trustees owe a fiduciary
duty to the beneficiaries, who are the
"beneficial" owners of the trust property.
The
trust is governed by the terms of the trust
document, which is usually written and in
deed form. It is also governed by local law.
In the United States, the settlor is
also called the trustor, grantor,
donor, or creator.
The trustee can be either a
person or a legal entity such as
a company. There can be multiple
trustees, in which case the
trust should provide a mechanism
for the trustees to make
decisions. A trust generally
will not fail solely for want of
a trustee; if there is no
trustee, whoever has title to
the trust property will be
considered the trustee. A court
may appoint a trustee if
necessary.
The trustees will
be the legal owners of the trust
property. They can, for example,
sign bank transactions, make
investments or rent out a house
(if part of the trust property).
By default, being a trustee is
an unpaid job. However, in
modern times trustees are often
lawyers or other professionals
who cannot afford to work for
free. Therefore, often a trust
document will state specifically
that trustees are entitled to
reasonable payment for their
work.
A trust can be created
without the trustees having any
knowledge of its existence.
However, it is usual for the
settlor to make arrangements
with potential trustees (for
example, friends or a
professional) before creating
the trust.
