A trust is a fiduciary relationship built around three primary roles in which one party, the Settlor or Grantor, transfers legal title of assets -such as real estate, stocks, or cash- to a second party, the Trustee (individual or corporate) to hold and manage them for the benefit of a third party, the Beneficiary or more beneficiaries.
It is not a separate legal entity/”person” like a company or family foundation, but a private agreement governed by a formal legal document called a “Trust Deed” or “Trust Instrument” which splits the “ownership” of the assets: the trustee holds the legal ownership/legal title (the right to control and manage the assets), while the beneficiary/ies hold/s the beneficial ownership/equitable title (the right to enjoy the benefits of the assets). Thus, this arrangement allows assets to be managed according to specific rules without the settlor and beneficiaries owning them.
The Trustee is held to the highest legal standard of care/conduct, known as a fiduciary duty, tasked with the duty to manage those assets with the fiduciary duty, i.e. must act solely in the best interests of the beneficiaries according to the Settlor’s instructions in the formal Trust Deed and informal Letter of Wishes.
In many cases, a single individual can occupy more than one role, for example, you can be the Settlor and the Trustee, or the Settlor and (one of) the Beneficiary(ies) of your trust. In any case, the utmost care must be taken when creating the trust to prevent it from being declared by the court as a sham with the consequence as if it never existed.
Do you want to know more about Trusts, where and how to start setting up your own trust? Reach out to us at +44 20 3974 1244 or at office@bensonformations.com. We are ready to navigate you through this complex field to the right solution for you.
