Free Newsletter Signup:

About our newsletter ...

Already a Subscriber?
To manage your current subscription settings, enter your email address.

Recent Articles

Life Member: The Top
Trial Lawyers in America

Past Articles


What is a trust? What can a trust do, and a trust own? Our newsletter today looks closer at the meaning of a trust, and some essential elements for trust planning.

First of all, what is a trust?

In its simplest form, a trust is an agreement. You transfer personal or business assets to another person or entity, and then you instruct that person or entity to hold the property for you or another person's benefit. A trust agreement is a contractual arrangement between you and the other person or entity.

In the above scenario, you are the trust settlor, the other person or entity is the trustee, and you or others are considered the beneficiaries under the agreement.

Trusts have been around for a very long time. Written trusts have been found to exist back to 625 BC when Roman solders went off to war. Trusts were commonly used during the Christian Crusades between 1095 through 1291 AD. The purpose was to pass land holdings to heirs if the crusader failed to return from battle.

Throughout England’s early history, trusts were often used by nobility and wealthy land owners, beginning in Medieval Times into the 20th Century. This allowed the ownership of land and power to remain concentrated in family hands.

The law of trusts increasingly developed from the 12th century. The common law - meaning judge made law through case precedents – regarded property as an indivisible entity, as it had been throughout Roman law. As time evolved, commercial interests matured, trust agreements became more commonly used, and were more refined for broader purposes.

Then in the early Americas, the use of trusts became increasingly used in the U.S. In 1882, the Rockefeller’s became well known for the establishment of trusts for their family and business interests. Today, U.S. trust laws are commonly used and codified into state statutory laws.

A trust is still conceptually the same arrangement it has always been. It's still an agreement between the trust settlor (you) and a trustee (a person or entity) for the benefit of someone (you or others).

Despite what some people believe, a trust is not a legal entity, And a trust is not a legal person. A trust is still nothing more than an agreement. Therefore, a proper way to think of a trust is as a trust agreement between parties for the purpose of designated parties.

And contrary to what some believe, a 'trust' does not own assets or enter into contracts. Only the trustee can own assets or enter into contracts, pursuant to the trust agreement terms and provisions.

A common expression is that assets are transferred to, or owned by, a trust. This convenient expression is not technically true. It's more correctly stated that assets are transferred to the trustees of an identifiable trust agreement pursuant to the terms and provisions of the trust.

During the Roman and Crusade eras, individuals transferred ownership of their land and other property to a trusted individual to protect the assets for their or another individual's benefit. The trust agreement provided for how the property would be protected, and then for the return of the property following battle. And if the crusader failed to return, how the property would be distributed to someone else as their beneficiary. 

There was no legal system in place to remedy a refusal to return land to the original owner. Since legal title was transferred to the 'friend' prior to going off to war, the land or property legally belonged to the friend.

However, the nobles of the day could petition a Lord Chancellor to regain and transfer the land back to them on the basis of 'equitable' interests. Over time, as the law of trusts developed, a Court of Chancery was created for such equitable legal disputes.

Early disputes distinguished between the legal title to the land held by the 'friend', and the equitable title of the original land owner. Court cases concluded that the friend held title in trust for the original owner. The outcome was said to be determined on the basis of an equitable decision.

Today, courts decide legal trust disputes based upon both law and equity.

The above distinction between legal and equitable title is an important characteristic of a trust even to this day. The trustee holds legal title to the assets of a trust for the benefit of the original owner. As a result, the trustee takes actions and enters into agreements based upon the terms and provisions of the trust agreement with respect to trust assets, and acquires or disposes of trust assets consistent with the trust terms.

At all times the trustee’s actions are for the benefit of the beneficiaries, meaning, you or others you designate. The trustee continues to hold title in the assets. This means that the beneficiaries (you or others) are the true beneficial owners of the assets as provided in the trust agreement.

The ownership of property has many different characteristics. Think of the legal interests in land split into different slices like a pie. Slices of the pie can be a right of occupancy, a right of use, or a right to collect profits. Other slices can be a right of control, or a right of beneficial interest. The trustee's slice is generally referred to as holding ‘bare legal title’. This means the trustee holds title for all other slices of interest, but nothing more.

Ultimately, the beneficiaries (you or others) have the right to all other interests in trust held assets other than the bare legal title. This includes right to income, right to possession, etc, including the right to acquire legal title at some future date, or as otherwise provided in the trust agreement.

The bifurcation of title is a very significant factor of trust law, and this becomes an important element in integrated asset protection and estate planning.

What’s necessary to create a valid trust?

Creating a trust is generally pretty simple. And trusts have many different purposes and are very commonly used today.

One of the trust requirements includes that it be created by a declaration that the owner wants the property to be held by a trustee for the benefit of the original owner. Another, is that the property is actually transferred to the trustee. And, the transfer is made by an instrument, for example, a Will, assignment, Bill of Sale, Deed, or other means. The transferor's intent must be clearly demonstrated, and a valid trust purpose must exist. And beneficiaries must be clearly defined.

No consideration is generally required for a transfer of assets to a trust, meaning no transfer of value or exchange of cash need occur. The transfer may be made gratuitously, which is typically the case for asset protection and estate planning purposes.

As noted, the creation of a trust is usually evidenced by a written trust agreement, referred to as a 'settlement of trust'. A trust can be created by an oral agreement for some types of property, however, a written trust is generally required for real estate. Naturally, a written instrument to create a trust is the preferred method as it better defines what was intended.

For many of our clients, we have long implemented trusts integrated with estate planning and asset protection. Asset protection can provide superior protection from business and personal litigation risks, divorce, tort threats, employee and government claims, personal and business sales, bankruptcy or claw back concerns, and many other threats and risks.

Why Trusts?

Two types of trusts we generally implement are the International Trust and Standby International Trust©. These trusts are used to protect and preserve assets for U.S. and non-U.S. citizens, in both the U.S. and across the globe.

The trusts we implement for our clients are generally integrated with asset protection, retirement planning, and estate planning. This means that the life and death sides are integrated as part of the overall planning. But there are significant differences between the Standby International Trust© and the International Trust. 

A Standby International Trust© is a domestic trust with a standby provision that allows you to elect to subsequently add in the future an additional trustee in any jurisdiction, anywhere in the world. An added foreign trustee can generally bring significant asset protection benefits. But there is no foreign trustee registered when the trust is first established.

In the future, when a risk materializes, you can register the trust in a more favorable asset protective jurisdiction. The trust could then have the full international asset protection benefits provided for in the trust, and in the jurisdiction where it is then registered.

In the meantime, you avoid annual foreign trustee fees and burdensome foreign compliance requirements.

And when you first establish the trust, domestically, you can use either a personal trustee of your choosing, or alternatively, a corporate trustee that we set up for you. In both cases they could be located where you reside.

A benefit of a personal trustee is no trustee fees, and it's often someone that knows you and your family. The benefit of a corporate trustee is that they are typically more experienced and routinely handle complex matters.

From the onset, the Standby International Trust© is implemented as a domestic trust, and not a foreign trust. For U.S. taxpayers, this means the trust is generally considered tax neutral. All asset-generated income and expenses pass through the trust to your personal tax return.

So, what happens after the standby election is made and completed?

The International Trust. This type of trust can be established one of two ways: 1) Designed and implemented from the beginning as an International Trust with a foreign trustee, or 2) After the standby election is exercised a foreign trustee can be elected, pursuant to the terms and provisions in the Standby International Trust©.

If, and when, a standby election is made to convert the trust to an International Trust, the trust can (and usually does) continue as a domestic trust even after the additional foreign trustee is added from a foreign jurisdiction. Alternatively, when you, assets or the trust are under threat, the domestic trustee can be removed for added asset protection.

As discussed in earlier newsletters, the International Trust offers significantly superior asset protection and planning not found locally at home.

Bring Some Certainty into Your World

There are approximately 100 complimentary past articles at our website that provide basic principles and tips for protecting your assets. Feel free to look closer at what international planning means; and how to protect assets in a changing world. Learn more about offshore risk management, how offshore is legal, and much more.

Asset protection planning - whether at home or abroad - provides a superior alternative for protecting a lifetime of achievement. An International Trust and a Standby International Trust© are two excellent examples for managing assets, global protection, and asset diversification.

As a former litigation attorney and judge, for the past forty years, I have witnessed fortunes quickly won and quickly lost. Asset protection designed and implemented with an eye towards future challenges is essential. Threats come from all directions when you least expect it: litigation, divorce, business and partnership disputes, social unrest, government controls, and elsewhere.

For most individuals, it’s all about asset protection, wealth preservation and estate planning.

For others: retirement and security. For some: opening doors to international investing, foreign currencies, offshore banking, and global diversification. And for others, it’s about keeping open the option for offshore living & investing, full or part-time.

For an increasing number, it’s about safety, security, and leaving behind America’s burdens. Or becoming a sovereign individual. And for the smart ones, a way to survive.

Integrated planning is an important component of the planning process to combine estate planning and protecting assets. Minimizing estate taxes, providing for surviving spouse or children, keeping assets from a re-marriage - or second marriage children - are a few of the objectives when integrating estate planning into a structure.

The freedom to choose can be found without leaving home by combining domestic and offshore planning. Learn to reopen the door to greater opportunities.

Your world will continue to change in unexpected, and seemingly random ways. Yet, there are ways to retain some certainty and control over your assets in a chaotic world.

Start Now.

There are more International Trust and Standby International Trust© tips found on our site right here.

The book How to Legally Protect Your Assets, 2nd edition, explains how you can use an International Trust to accomplish your objectives. And information on the Standby International Trust© can be found on our site, too.

Offshore Living & Investing, 2nd edition, takes offshore planning to another level.

Both books are available at reduced prices at our web site in quality soft cover, pdf, or Kindle.

If you’d like to learn more and discuss your planning objectives in a confidential initial review, contact me to schedule a call.

Until next time …