That is, one person can be trustor and trustee, and another can be the beneficiary, or one can be trustor and beneficiary, and another be a trustee; or one person can be trusted or and another can be trustee and beneficiary.
In the United States, a trust is presumed to be irrevocable unless the instrument or will creating it states it is revocable; except in California, Oklahoma, and Texas, in which trusts are presumed to be revocable until the instrument or will creating them states, they are irrevocable. An irrevocable trust can be "broken" (revoked) only by a judicial proceeding.
A trust is a legal relationship created (in a lifetime, or on death) by a settlor when assets are placed under the control of a trustee for the benefit of a beneficiary, or for a specified purpose.
A trust has the following characteristics:
The trust assets constitute a separate fund and are not a part of the trustee's own estate.
Legal title to the trust assets stands in the name of the trustee, or in the name of another person on behalf of the trustee.
The trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed on him by law.
The reservation by the settlor of certain rights and powers and the fact that the trustee may himself be a beneficiary are not necessarily inconsistent with the existence of a trust.
The key characteristic of a trust is that it permits the separation of legal ownership and beneficial interest: the trustees become the owners of the trust property as far as third parties are concerned, and the beneficiaries are entitled to expect that the trustees will manage the trust property for their benefit.
Trusts are either express trusts (that is, a trust created intentionally by an act of the settlor), or trusts imposed by law. There are three types of trust that are imposed by law:
Trusts have existed since Roman times and have become one of the most important innovations in property law. Trust law has evolved through court rulings differently in different states, so statements in this article are generalizations, understanding the jurisdiction-specific case law involved is tricky. Some U.S. States are adopting the Uniform Trust Code to codify and harmonize their trust laws, but state-specific variations still remain.
Generally, a trust requires three certainties
- Intention. There must be a clear intention to create a trust
- Subject Matter. The property subject to the trust must be clearly identified (Palmer v Simmonds). One may not, for example, state, settle "the majority of my estate", as the precise extent cannot be ascertained. Trust property may be any form of specific property, be it real or personal, tangible or intangible. It is often, for example, real estate, shares or cash.
- Objects. The beneficiaries of the trust must be clearly identified, or at least be ascertainable (Re Hain's Settlement). In the case of discretionary trusts, where the trustees have the power to decide who the beneficiaries will be, the settlor must have described a clear class of beneficiaries. Beneficiaries may include people not born at the date of the trust (for example, "my future grandchildren"). Alternatively, the object of a trust could be a charitable purpose rather than specific beneficiaries.