Trust law is the legal framework where property is assigned to an entity called a trust and in which that property is controlled by one person for the benefit of someone else. The controller of the trust is usually called a trustee in the United States and a settlor in many other English-speaking nations governed by common law. Property in the trust is administered for a third party, who is typically called the beneficiary. Trust law covers how trusts are created, they own property, they govern use of the property and they decide ultimately happens to the property in them.
Trusts in the modern sense are considered to have developed in the 1100s in England during the Crusades. Feudal lords would transfer authority over holdings to another person while away fighting so that the business of the lord’s enterprises could continue. There was no legal framework to require re-transfer of the land upon the lord’s return. If there were disputes, they were typically resolved in court in the feudal lord’s favor and over time a framework for the lands to be held in trust for the lord’s benefit evolved.
Trust law governs the creation of a trust, which can be done orally or in writing, during a property owner’s life or as a result of a will, or by the order of a court. Each trust has conditions, also governed by trust law, that spell out who the trustee is, who the beneficiary is and what the trustee is expected to do with the property held in trust. A variety of purposes for property are covered by trust law and include estate planning, controlling the speed at which inherited or gifted property may be disposed of, charitable donations and tax planning to name a few.
An express trust is a common form of trust in which a property owner expressly spells out what is to happen to the property being held, but increasingly complex situations are covered by trust law as it has evolved. A dynasty trust allows one generation of property owners to will property not to the next succeeding generation, but to skip one and leave it to grandchildren or great grandchildren.
A unit trust is divided into shares, the value of which rise and fall with the value of the underlying property in trust and which can be assigned to beneficiaries who participate in distributions from the trust based on the number of shares held. Many other types of trust have been developed as well, but in general, the purpose of trust law is to give a property owner the ability to control what happens to his or her property through another person for the benefit of others.