Nature and classification of trusts—the nature and classification of trusts

Published by a ��˾��ҹ�� Private Client expert

Practice notes

Nature and classification of trusts—the nature and classification of trusts

Published by a ��˾��ҹ�� Private Client expert

Practice notes

Nature of trusts

The trust concept

Typically, the settlor is the original owner of property and creates a trust by conveying it to one or more trustees and manifesting an intention that it is to be held on trust for one or more beneficiaries or for the accomplishment of a particular purpose. The trustees become owners at common law and hold the property or rights in trust for the beneficiaries (cestuis que trust) or that purpose. The trustees come under an equitable obligation enforceable by the beneficiaries. No trust is created, whatever the intention of the settlor, unless legal title is vested in the trustee (this is known as constituting the trust).

Definition

While the trust concept is recognisable, a definition is not so easy.

The definition set out in The Law of Trusts and Trustees 10th edition by Underhill and Hayton was adopted by the Court of Appeal in Green v Russell per Romer LJ:

'A trust is an equitable obligation, binding a person (who is called a trustee) to deal

Jurisdiction(s):

United Kingdom

Key definition:

Equity definition

What does Equity mean?

Capital that is used to finance companies in the form of ordinary share capital as opposed to debt finance. The term is also sometimes used to describe preference shares or subordinated loan capital contributed by equity investors (commonly known as quasi-equity) to distinguish it from third party debt.

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