Trusts Law Explained

What is a trust? by Hesham Rafei

A trust is a legal arrangement where one person, the settlor, transfers assets to a trustee, to manage for the benefit of someone else, called the beneficiary. Think of it as a special box, where you put valuable things, but instead of holding them yourself, you ask someone trustworthy to keep them safe for someone else. It's a legal way to manage assets, like money, property, or investments, for the benefit of another person.

There are three main players in a trust.

The Settlor: This is the person who creates the trust, and puts the assets into it. Think of them as the original owner.
The Trustee: This is the person or organization chosen, to hold and manage the assets in the trust. They have a legal duty to act in the best interests of the beneficiaries.
The Beneficiaries: These are the people who ultimately benefit from the trust. They receive the assets or income, according to the settlor's instructions.

The assets held in a trust are called the trust property or trust fund. This can include anything of value.

The trustee holds legal title to the property, meaning they have the power to manage it. However, the beneficiaries have equitable title, meaning they are the ones who ultimately benefit from it, like the income for example.

Trusts are useful for many reasons.

Trusts can safeguard assets from creditors or poor financial decisions.
It can ensure that loved ones are taken care of after the settlor's death.
It can be used to manage assets for minors , people with disabilities , or those who are unable to manage their own finances.
It can also be used to donate to charity or support a specific cause.

Trusts can be created during the settlor's lifetime , or after their death through a will, and they can either be Express, or implied.

Express trusts are created intentionally by the settlor, either during their lifetime or in their will.
Implied trusts are created by the courts to ensure fairness, usually when an express trust fails or is not properly created.