🥺
Trusts • Express Private Trusts
TRUSTS#001
Legal Definition
There are 7 elements of a valid, private, express trust and you can remember them as Very Delicious PITAS:
(1) Valid trust purpose.
(2) Delivery
(3) Property
(4) Intent
(5) a Trustee
(6) an Ascertainable beneficiary
(7) a Settlor (or trustor)
Estate planning is always a valid trust purpose. The trustee of a trust holds legal title for the benefit of another, who holds equitable title.
(1) Valid trust purpose.
(2) Delivery
(3) Property
(4) Intent
(5) a Trustee
(6) an Ascertainable beneficiary
(7) a Settlor (or trustor)
Estate planning is always a valid trust purpose. The trustee of a trust holds legal title for the benefit of another, who holds equitable title.
Plain English Explanation
To create a trust that courts will actually recognize and not simply ignore, you need 7 elements:
(1) A settlor (sometimes also called a trustor), which is a fancy name for the original owner of the property who creates the trust to manage the property. So if Bob creates a trust, Bob is the settlor.
(2) A trustee, which is a fancy name for the person who is in charge of managing and administrating the trust. So if Bob creates a trust and names Sam as trustee, Sam will be in charge of making sure the trust is properly managed.
(3) The settlor must deliver the trust property to the trustee. In other words, the whole point of a trust is that a person who owns and controls property gives up their ownership and control and hands it over to a trustee to manage the property. Thus, for a trust to be valid, a settlor must actually deliver property to the trustee in a way that gives up control. This may mean signing over ownership, or physically handing property over. What's important is that the original owner (settlor) can't control it anymore.
(4) The person creating the trust must have intended to actually create a trust.
(5) A trust is all about managing stuff, so there has to be stuff to manage. This is called "trust property," or "res".
(6) Another purpose of a trust is for a trustee to manage property for the benefit of someone. Thus, there has to be a beneficiary to benefit in order for a trust to be valid.
(7) Finally, a valid trust must have a valid trust purpose. The most common purpose for a trust is "estate planning." A not valid trust purpose would be "hiding assets from creditors."
(1) A settlor (sometimes also called a trustor), which is a fancy name for the original owner of the property who creates the trust to manage the property. So if Bob creates a trust, Bob is the settlor.
(2) A trustee, which is a fancy name for the person who is in charge of managing and administrating the trust. So if Bob creates a trust and names Sam as trustee, Sam will be in charge of making sure the trust is properly managed.
(3) The settlor must deliver the trust property to the trustee. In other words, the whole point of a trust is that a person who owns and controls property gives up their ownership and control and hands it over to a trustee to manage the property. Thus, for a trust to be valid, a settlor must actually deliver property to the trustee in a way that gives up control. This may mean signing over ownership, or physically handing property over. What's important is that the original owner (settlor) can't control it anymore.
(4) The person creating the trust must have intended to actually create a trust.
(5) A trust is all about managing stuff, so there has to be stuff to manage. This is called "trust property," or "res".
(6) Another purpose of a trust is for a trustee to manage property for the benefit of someone. Thus, there has to be a beneficiary to benefit in order for a trust to be valid.
(7) Finally, a valid trust must have a valid trust purpose. The most common purpose for a trust is "estate planning." A not valid trust purpose would be "hiding assets from creditors."
Hypothetical
Hypo 1: Bob has a valuable collection of rare coins. He decides to create a trust to manage this collection for his son, Timmy. He appoints his friend, Sam, as the trustee. Bob formally hands over his coin collection to Sam and clearly states his intention to create a trust for Sam’s benefit. Result: This is a valid trust because it meets all the necessary elements: Bob is the settlor, Sam is the trustee, the coin collection is properly delivered and is the trust property, Bob has a clear intent, Timmy is the beneficiary, and preserving valuable items for family is a valid trust purpose.
Hypo 2: Bob wants to set up a trust for Timmy with his stock portfolio. However, he only tells Timmy about it and does nothing else. Result: This trust is not valid because Bob didn’t deliver the stock portfolio to a trustee, nor did he formally declare his intent or appoint a trustee. Just telling Timmy doesn’t count.
Hypo 3: Bob writes in his will that he leaves his house in a trust for Timmy, with his lawyer as the trustee. After Bob's passing, the lawyer takes charge of the house. Result: This is a valid trust. Bob's will established his intent, appointed a trustee, identified the trust property (the house), and Timmy as the beneficiary. The purpose of managing property after someone's death is valid.
Hypo 2: Bob wants to set up a trust for Timmy with his stock portfolio. However, he only tells Timmy about it and does nothing else. Result: This trust is not valid because Bob didn’t deliver the stock portfolio to a trustee, nor did he formally declare his intent or appoint a trustee. Just telling Timmy doesn’t count.
Hypo 3: Bob writes in his will that he leaves his house in a trust for Timmy, with his lawyer as the trustee. After Bob's passing, the lawyer takes charge of the house. Result: This is a valid trust. Bob's will established his intent, appointed a trustee, identified the trust property (the house), and Timmy as the beneficiary. The purpose of managing property after someone's death is valid.
Visual Aids
