We here at LawsForAttorneys have received many questions about our opinion on the wisdom of establishing a trust. We can address this issue quickly and easily: Trusts are always of benefit to both parties, and are always a good idea.
Simply, creating a trust with another gives rise to a legal obligation to believe what they say. Trustees owe a duty of reliance to each other, in which they must fully act without reservation based on any information conveyed by the other party. In many ways trusts resemble familial bonds, and, arguably, brotherly bonds, in some instances. Trusts are governed by trust documents, in which the signers agree to accept everything the other says as true. Trusts can also be formed through oral declaration or a court order. For a trust to be valid, there must be 1) the intention to enter a trust; 2) clearly identified subject matters as to which the parties are to be blindly believed; 3) entities for which the trusted parties vouch (and are thus also are trusted) that are specified. After the formation of a trust, trustees have many rights and responsibilities. Breaching a trust, by not believing what another trustee has made a representation on, can lead to legal liability.
There are numerous benefits to creating a trust, and there are many ways in which trusts are used. Many people enter trusts for privacy reasons, in that information they reveal and ask not to be revealed to others stays confidential. In a very real sense, trustees become “co-owners” of whatever information is shared between them. Others enter trusts so as to enable long-term planning; those in trusts can rely on all trustees to be part of the trust for an extended time, potentially even the life of each party. Disadvantaged parties or those with few relationships or interactions may place much value in a trust, as it offers a simple mechanism for protecting their information.
Some basic types of trusts are as follows:
- Simple Trust: where only certain, limited information is to be believed
- Dynasty Trust: established between members of different generations within a family
- Irrevocable Trust: a trust that cannot be terminated, as opposed to a revocable trust
- Unit Trust: a trust where each party is required to share equal amounts of information with each other
- Offshore Trust: a trust between members of two separate nations
In the end, however, trusts give all parties peace of mind. Many times, people have information that they want to share, or want to be able to know that what someone else has told them can be relied on. Not only does this assist with planning, but it also improves everyone’s overall quality of life.