What is a trust?

Since medieval times, the trust has been used as a structure to avoid inconvenient and rigid common law rules, especially with respect to property law and taxation.

The generally accepted definition is that of Sir Arthur Underhill outlined in his treatise "Law of Trusts and Trustees". The trust is there defined as "an equitable obligation binding a person to deal with property over which he has control for the benefit of persons of whom he may himself be one and any one of whom may enforce the obligation."

The word "trust" therefore refers to the duty or aggregate obligations that rest upon the trustee. The obligations are in relation to the property held by him or under his control. He will be compelled by a court to administer that property in the manner lawfully prescribed by the trust instrument or to the extent that such provision may be lacking, in accordance with the laws of the jurisdiction in which the trust has been established. As a consequence, the administration will be in such manner that the advantages accrue not to the trustee but to the beneficiaries; if not, it will accrue for the purpose for which the trust has been established.

Trusts are generally created by deed or other writing sufficient to evidence the clear intention of the settlor. The terms of the trust are specified in the trust instrument or declaration that constitutes it. If the settlor wishes to vest property in another person as trustee he must, in order to render the trust completely constituted, comply with all the formalities required for a transfer of the property in question.