Trusts: Creation and Elements

A trust is a legal relationship in which one person (the settlor) transfers property to another person (the trustee) to hold for the benefit of a third person (the beneficiary). The trustee has a duty to manage the property for the benefit of the beneficiary.

The three essential elements of a trust are a settlor, a trustee, and a trust res. The settlor is the person who creates the trust, the trustee is the person who holds the property in trust, and the trust res is the property that is held in trust.

A trust is created during the settlor's lifetime, while a will is created after the settlor's death. A trust is created for the benefit of a third person, while a will is created for the benefit of the settlor's heirs. A trust is revocable, while a will is irrevocable.

The different types of trusts include revocable trusts, irrevocable trusts, and testamentary trusts. Revocable trusts can be changed or terminated by the settlor during their lifetime. Irrevocable trusts cannot be changed or terminated by the settlor after they have been created. Testamentary trusts are created by a will and take effect after the settlor's death.

The duties of a trustee include managing the trust property for the benefit of the beneficiary, investing the trust property prudently, and keeping the beneficiary informed of the trust's activities.

A breach of trust occurs when a trustee fails to perform their duties, acts in their own self-interest, or invests the trust property in a risky manner.

The remedies for a breach of trust include removing the trustee from their position, ordering the trustee to pay damages to the beneficiary, and terminating the trust.

A resulting trust is a trust that is created when a person transfers property to another person without specifying how the property is to be used. The trust is implied by law and the trustee is required to hold the property for the benefit of the settlor.

A constructive trust is a trust that is created by a court order. The trust is imposed on a person who has acquired property through fraud or duress. The trustee is required to hold the property for the benefit of the person who was defrauded or coerced.

A charitable trust is a trust that is created for the benefit of a public charity. The trust property is used to support the charity's activities.

A spendthrift trust is a trust that prevents the beneficiary from spending the trust property. The trust property is held in trust for the benefit of the beneficiary, but the beneficiary cannot access the property until they reach a certain age or until they meet certain conditions.

A discretionary trust is a trust in which the trustee has the discretion to distribute the trust property to the beneficiary. The trustee can choose to distribute the property all at once, in installments, or over a period of time. The trustee can also choose to accumulate the trust property and distribute it to the beneficiary at a later date.

A perpetuity is a rule of law that prevents a trust from lasting for more than 21 years after the death of the settlor. This rule is designed to prevent trusts from becoming perpetual and to ensure that the trust property is eventually distributed to the beneficiaries.

A cy-près doctrine is a doctrine that allows a court to modify the terms of a trust if the original purpose of the trust becomes impossible or impracticable. The court will modify the terms of the trust in a way that is as close as possible to the original purpose of the trust.

A trust protector is a person who is appointed by the settlor to oversee the administration of the trust. The trust protector has the power to remove the trustee, modify the terms of the trust, and distribute the trust property to the beneficiaries.