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Trust
Practical Law ANZ Glossary w-003-4403 (Approx. 3 pages)
Glossary
Trust
A trust is a legal relationship between a trustee, the trust property and a beneficiary. A trust is created (in lifetime, or on death) by a settlor when assets are placed under the control of a trustee for the benefit of a beneficiary, or for a specified purpose.
A trust has the following characteristics:
- Because it is not a legal person, a trust cannot itself enter into transactions. The trustee enters into all transactions on behalf of the trust.
- The trust assets constitute a separate fund and are not a part of the trustee's own estate.
- Legal title to the trust assets stands in the name of the trustee, or in the name of another person on behalf of the trustee.
- The trustee has the power and the duty, in respect of which it is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed on it by law.
- The reservation by the settlor of certain rights and powers, and the fact that the trustee may itself be a beneficiary, are not necessarily inconsistent with the existence of a trust.
The key characteristic of a trust is that it permits the separation of legal ownership and beneficial interest: the trustee becomes the owner of the trust property as far as third parties are concerned, and the beneficiaries are entitled to expect that the trustee will manage the trust property for their benefit.
Trusts are either express trusts (that is, a trust created intentionally by an act of the settlor), or trusts imposed by law. For more information, see Practice note, Trusts: overview.