Trusts, fiduciaries and matters of equity
When the common law goes a bit runny at the edges™
Law: A common law intellectual structure where the legal owner of an asset (the “trustee”) holds the benefit of the asset for others, presumptively beyond the reach of the trustee’s creditors. In the English common law, a metaphysical construct achieved by splitting an individual’s “equitable” or “beneficial” ownership away from er “legal” ownership; in the Americas, an existential one whereby trusts have animated themselves into full personhood. This is quite an evolution when you stop to think about it.
Trusts are created as follows:
Day 1: There is this dude who owns a thing. The dude we will call a “settlor”, and the thing we will call an “asset”.
Day 2: Without legally giving them the asset outright, settlor dude wants to give the value of the asset to another dude, or dudes, or generalised class of dudes — whom we will call the “beneficiaries” — . This non-legal-ownership-but-all-other-value we call the “benefit” or “beneficial ownership” of the asset.
Day 3: The settlor dude appoints a third dude as a “trustee” and legally transfers the asset to the trustee on express terms that she must hold the asset “on trust” for the beneficiaries according to the terms of the contract creating the trust (usually a trust deed).
Things to note: The settlor and the trustee can be the same person. The settlor and the trustee can also be beneficiaries, though the trustee cannot be the only beneficiary, because then the separation of legal and beneficial ownership fails.The trust has no separate legal personality, so a person who owns all the legal title and all the beneficial interest in an asset is not a trustee anymore: they are jsut the outright owner.
Business: The foundation-stone of all commerce, the wellspring of prosperity and the operating principle without which we would not have made it out of the trees, the need for which bitcoin fundamentalists still think they’ve finally managed to eliminate from the system. (They haven’t).
- fiduciary — the kind of trust you can still have even when your own lawyers — often hailing from sniffy continental climes, loudly hark back to Romans and the civil law tradition — call a trust a metaphysical impossibility.
- Indemnity, for how to get comfortable with the risk of a trustee exceeding the scope of its powers without you knowing it;