What are Trusts?

Answer 1

The common law recognizes two types of property ownership: legal ownership and equitable ownership. 'Legal ownership' refers to the ownership at face value, for example, the person in whose name an automobile or a piece of land is registered. 'Equitable ownership' looks beyond face value, to the true owner. This is the area of law where you will come across trusts. If you provide your money to someone for the purpose of buying something for you, and that person buys it in his or her name instead of in your name, that person is said to own that something 'in trust' for you. (Note: This example holds true whether or not there is any fraudulent intent involved. It is not unusual for the 'paper' ownership of something to be in a name other than the true owner, without any fraudulent intent whatsoever. The stockmarket is a prime example of this.) If I give you some of my money and ask you to go to the auction sale and buy a dozen chickens for me, the bill of sale may be in your name, (i.e., you have legal title to the chickens), but I have equitable ownership of the chickens. In other words, you own the chickens 'in trust' for me. Sometimes a trust is set up by means of a lengthy legal document, sometimes by a verbal agreement, and sometimes just through a course of conduct of the parties involved.