Taking the time to understand, utilize and / or create a Trust not only opens up new avenues for lawful, financial and practical remedies but it also opens our perceptions and consciousness to all of the various trust structures that various governments, agencies, corporations, courts, foundations, financial firms, etc. use to their advantage in dealing with the public as well with themselves privately. Many of these trust structures are hidden from our view through the use of deceptive language, false narratives, complex legal descriptions, missing educational curricula and our own ignorance of history and contract law. This series of blogs will shed light on many of these trust structures and teach you how to unravel the deceptive language and complex legal descriptions as well as to ascertain and comprehend the hidden trust structure that lurks beneath.
Let’s Start with some History:
The Crusades were a series of military campaigns organized by popes and Christian western powers to take Jerusalem and the Holy Land back from Muslim control and then defend those gains. There were eight major official crusades between 1095 and 1270, as well as many more unofficial ones. In all, the crusades led to hundreds of thousands of people, both members of the nobility and those from the lower classes of society, taking up arms to join in the fight for recapturing the Holy Land.
Those crusaders who owned land had a problem. They could — and often would — be away from tending their land for years at a time. What those crusaders needed was someone who could look after their land, manage it and farm it, whilst they were away. Those crusaders did not want to give their land away but instead wanted someone to take temporary custody of it. The land had to be returned to the original landowner on his return from the crusade. The land needed to be given away elastically, so that its ownership would always bounce back to the original landowner.
The common law, with its myopic view of matters, could not help the landowner. Even today, if you give something away, the common law sees a change in ownership of the property from you to the recipient. You are no longer the owner at common law. You have given the property away. You have relinquished all claims to it. The common law could not assist the landowner who went away on crusade because the common law was not subtle enough to help with the landowner’s problem. The common law would simply say that the landowner had given his land away to someone else.
Equity Law:
Equity, though, through contracts and the division of legal from equitable title could assist. Equity was capable of looking at the entire situation and seeing that the landowner only wanted to transfer his land to someone else on a time-limited basis (revocable trust). Equity would see that the land was to be, effectively, loaned out and that it was always to be returned to the landowner at the end of the loan period. Equity achieved that outcome through creating and developing the medium of the trust. The landowner would remain the true owner of the land, passing the day to day management of the land to someone else while he was away on crusade. That manager would then return the land to its rightful owner upon his return. The landowner, it might be said, trusted the manager to look after the land for him during his absence and return it to him on his return. These simple contracts put together by landowners embarking on a crusade were some of the first Trusts.
Elements of a Trust:
A simple Trust has a Grantor, at least 1 Trustee and at least 1 Beneficiary. The Grantor is the individual or organization that provides the first funding of the Trust (known as the Trust Corpus). The Trustees are the officers of the Trust who manage the legal and financial transactions of the Trust. The Beneficiaries are the ones who benefit from the Trust, have usage rights and who the Trust is set up for.
The Beneficiaries are said to have the equitable title to the Trust property and the Trustees have the nominal or legal title to the Trust property. This is a key concept of a Trust – the division of ownership into the legal title and equitable title.
Now there is one more element of the Trust that we need to discuss and this is the Trust Indenture. The Trust Indenture is the governing document of the Trust which is essentially the intentions of the Grantor who set the Trust up. The Trust Indenture specifically lays out who the Beneficiaries are and what Benefits they are entitled to and under what conditions that they are entitled to those Benefits. This Trust Indenture is essentially the governing law that the named Trustees must strictly adhere to in order to receive their compensation. If the Trustees, don’t carry out the conditions set forth in the Trust Indenture they risk being removed and replaced as Trustees.
At the heart of a Trust is a contract. This contract is the Trust Indenture. It is a contract directly between the Grantor or Settlor who is the one who puts property into the Trust and divides the Rights into the Legal Rights and Equitable Rights. The Grantor then assigns them to the Trustees and Beneficiaries respectively. Think of the Grantor as the original property owner who is entrusting that property to the Trustees. These Trustees will be well known to the Grantor as he is entrusting his property, which could be a business, a house, an investment account, a crypto wallet, etc., with explicit instructions to these Trustees to manage the property in a specified way and to take care of the Beneficiaries. All of these instructions and intents, should be explicitly written into the Trust Indenture. This Trust Indenture is the contract. It should have all of the rules, instructions, intents, guidelines, etc. that will keep the Trust running smoothly far into the future.
Trusts are a great tool for protecting assets, conveying assets to third parties (Beneficiaries), protecting the rights of Beneficiaries, providing incentives to Beneficiaries for specified conduct, minimizing taxes and limiting government oversight of property held in trust.