Trust Elements – A Settlor With Intent
A trust has five main elements. First, a settlor transfers some or all of his or her property. Second, the property transferred by the settlor is designated trust property. Third, the trust property designated by the settlor is transferred with the settlor’s intent that it be managed by another. Fourth, the trust property designated by the settlor is transferred for management by a trustee. Fifth, the trust property designated by the settlor is managed by a trustee for the benefit of a beneficiary. This article discusses the elements of a settlor and intent.
In exceptional circumstances, a trust may be created by a court of equity to remedy some inequity. Otherwise, a trust is created by a person known as the creator, grantor, settlor, or trustor. Creator refers to the creation of the trust. Grantor refers to the granting of property to create the trust. Trustor refers to the person’s status as creator of the trust. The term most often used, however, is settlor. The term “settlor” originated in medieval England.. In medieval England, trusts were often used in marriage agreements and other settlements.
The settlor is vitally important because the settlor must provide the property for the trust and transfer that property to the trust. Unless a trust is created by a court of equity to remedy some inequity, a trust can be created only by the person who owns the property transferred to the trust (or, technically, by another acting on that person’s behalf, via a power of appointment).
Notice that a settlor must have the legal capacity to create a trust. To create a trust during his or her life, the settlor must be an adult. To create a trust during his or her life, the settlor must be capable of managing his or her own property. A settlor cannot be an adult for whom a guardian has been appointed. To create a trust in his or her will, the settlor must have testamentary capacity.
A Settlor With Intent
In exceptional circumstances, a trust may be created by a court of equity to remedy some inequity. Otherwise, the settlor must have the express intent or implied intent to create a trust. The intent must be overtly manifested. The settlor usually manifests his or her intent to create an express trust during his or her life by executing an instrument also known as a trust. The intent to create a trust need not coincide with the transfer of the trust property. A present intent to create a trust may exist even though the trust property is a future interest.
Precatory words are not sufficient to create a trust, but the words “trust” or “trustee” do not have to be used. A trust may be conditioned on the occurrence or nonoccurrence of an independent event.
Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.