Trusts

A trust is a term that generally means a right in property which is held by one party in a fiduciary relationship for the benefit of an additional party. The property that can be held in trust can be either personal or real. The beneficiary of the trust is the individual who will receive the benefit of the trust. The trustee on the other hand, holds the title to the trust property. A settlor is the person who creates the trust by transferring some or all of his/her property to a trustee to hold in trust. Some trusts are created in conjunction with wills, whereas others are used as an alternative to wills. Each State regulates the determination of validity and limits for trusts and wills.

Brief Historical Background

Trusts have a history dating back to before Roman times. In England during the beginning of 1500, landowners found advantages to conveying the legal title of their land to other parties while still retaining the benefits of ownership of the land. By doing this, there were benefits: they were immune from creditors as wealth was usually measured but the amount of land someone owned; they were released from some feudal obligations. Even though concerns of feuds no longer exist and the fact that wealth is measured by other ways than just the amount of land one owns, the concept of trusts has not only survived but has flourished.

In property law, trusts have become one of the most significant innovations. While the law regarding trusts had been fairly uniform throughout the United States, in the past approximately 150 years, lawyers began choosing the law of Massachusetts regarding the government of disposing of property that is held in trust. It was believed that Massachusetts’ courts had greater experience with rulings on trust questions than any other State. From then onwards, each State who adopted Massachusetts’ law of trusts have incorporated changes in regards to exceptions that are reflective of that State.

Precedent Setting Cases

One very famous case involving trust law is the landmark case of Marshall versus Marshall, involving Anna Nicole Smith. Prior to J.

Howard Marshall’s marriage to Smith, he set up a trust made up of all of his owned assets, that would be divided between charities and his son after his death. Prior to Marshall’s death, he did not set up any trust for Smith. Smith claimed that Marshall was planning on leaving her half of the appreciation of the trust but that his son had interfered with the formation of this additional trust. His son performed many acts while Marshall was still alive in order to ensure Smith did not receive Marshall’s money. Smith ended up being excluded from Marshall’s estate and therefore sued for a share of the estate. In the end, Smith lost her suit and ended up petitioning for bankruptcy in the State of California.

Defenses

Termination of trusts are more applicable than defenses. All trusts that have individual beneficiaries end at a certain date. There are also differences as to expiration between revocable and irrevocable trusts – whether it can be revoked or whether the trust terminates when it expires according to its terms. There are a few different ways to terminate a trust.

Reformation or termination by consent means that the trust can be modified or terminated as long as all beneficiaries and the grantor consent. A court must also approve it and has the power to change or terminate the trust if the original purpose of the trust is inconsistent. Another method is to reform/fix the trust. A court is permitted to reform irrevocable trusts to fix a problem that has developed or to make them work better.