In common law legal systems, a trust is a relationship between three parties whereby property (real or personal, tangible or intangible) is transferred by one party to be held by another party for the benefit of a third party. A trust is created by a settlor (archaically known as the feoffor to uses), who transfers some or all of his property to a trustee (archaically known as the feoffee to uses), who holds that trust property (or trust corpus) for the benefit of the beneficiaries (archaically known as the cestui que use, or cestui que trust). The trustee has legal title to the trust property, but the beneficiaries have equitable title to the trust property. The trustee owes a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property. (Note: A trustee may be either a natural person, or an entity, and there may be a single trustee or multiple co-trustees. There may be a single beneficiary or multiple beneficiaries. The settlor may himself be a beneficiary.)

The trust is governed by the terms under which it was created. The terms of the trust are most usually written down in a trust instrument. The terms of the trust must specify what property is to be transferred into the trust, and who the beneficiaries will be of that trust. The trust is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust and the governing law.

In the United States, the settlor is also called the trustor, grantor, donor or creator. In some other jurisdictions, the settlor may also be known as the founder.

History

Roman law had a well-developed concept of the trust (fideicommissum) in terms of "testamentory trusts" created by wills but never developed the concept of the "inter vivos trust" that applied while the creator was still alive. This was created by later common law jurisdictions.

Personal trust law developed in England at the time of the Crusades, during the 12th and 13th centuries.

At the time, land ownership in England was based on the feudal system. When a landowner left England to fight in the Crusades, he needed someone to run his estate in his absence, often to pay and receive feudal dues. To achieve this, he would convey ownership of his lands to an acquaintance, on the understanding that the ownership would be conveyed back on his return. However, Crusaders would often return to find the legal owners' refusal to hand over the property.

Unfortunately for the Crusader, English law did not recognize his claim. As far as the courts were concerned, the land belonged to the trustee, who was under no obligation to return it. The Crusader had no legal claim. The disgruntled Crusader would then petition the king, who would refer the matter to his Lord Chancellor. The Lord Chancellor could do what was "just" and "equitable", and had the power to decide a case according to his conscience. At this time, the principle of equity was born.

The Lord Chancellor would consider it unjust that the legal owner could deny the claims of the Crusader (the "true" owner). Therefore, he would find in favor of the returning Crusader. Over time, it became known that the Lord Chancellor's court (the Court of Chancery) would continually recognize the claim of a returning Crusader. The legal owner would hold the land for the benefit of the original owner, and would be compelled to convey it back to him when requested. The Crusader was the "beneficiary" and the friend the "trustee". The term use of land was coined, and in time developed into what we now know as a trust.

Also, the Primogeniture system could be considered as a form of trust. In Primogeniture system, the first born male inherited all the property and "usually assumes the responsibility of trusteeship of the property and of adjudicating attendant disputes."

The waqf is an equivalent institution in Islamic law, restricted to charitable trusts.

"Antitrust law" emerged in the 19th century when industries created monopolistic trusts by entrusting their shares to a board of trustees in exchange for shares of equal value with dividend rights; these boards could then enforce a monopoly. However, trusts were used in this case because a corporation could not own other companies' stock Holding companies were used after the restriction on owning other companies' shares was lifted. Today, trusts play a significant role in all common law systems, and their success has led some civil law jurisdictions to incorporate trusts into their civil codes. France, for example, recently added a similar though-not-quite-comparable notion to its own law with la fiducie, which was modified in 2009; la fiducie, unlike the trust, is a contract. Trusts are recognized internationally under the Hague Convention on the Law Applicable to Trusts and on their Recognition which also regulates conflict of trusts.

Although trusts are often associated with intrafamily wealth transfers, they have become very important in American capital markets, particularly through pension funds (essentially always trusts) and mutual funds (often trusts).

Basic principles

Property of any sort may be held on trust, but growth assets are more commonly placed into trust (for tax and estate planning benefits). The uses of trusts are many and varied. Trusts may be created during a person's life (usually by a trust instrument) or after death in a will.

In a relevant sense, a trust can be viewed as a generic form of a corporation where the settlors (investors) are also the beneficiaries. This is particularly evident in the Delaware business trust, which could theoretically, with the language in the "governing instrument", be organized as a cooperative corporation, limited liability corporation, or perhaps even a nonprofit corporation. # the will of a decedent, usually called a testamentary trust; or # a court order (for example in family proceedings).

In some jurisdictions certain types of assets may not be the subject of a trust without a written document.

Formalities

Generally, a trust requires three certainties, as determined in Knight v Knight: # Intention. There must be a clear intention to create a trust (Re Adams and the Kensington Vestry) # Subject Matter. The property subject to the trust must be clearly identified (Palmer v Simmonds). One may not, for example, settle "the majority of my estate", as the precise extent cannot be ascertained. Trust property may be any form of specific property, be it real or personal, tangible or intangible. It is often, for example, real estate, shares or cash. # Objects. The beneficiaries of the trust must be clearly identified, or at least be ascertainable (Re Hain's Settlement). In the case of discretionary trusts, where the trustees have power to decide who the beneficiaries will be, the settlor must have described a clear class of beneficiaries (McPhail v Doulton). Beneficiaries may include people not born at the date of the trust (for example, "my future grandchildren"). Alternatively, the object of a trust could be a charitable purpose rather than specific beneficiaries.

Trustees

The trustee may be either a person or a legal entity such as a company. A trust may have one or multiple trustees. A trustee has many rights and responsibilities; these vary from trust to trust depending on the type of the trust. A trust generally will not fail solely for want of a trustee. A court may appoint a trustee, or in Ireland the trustee may be any administrator of a charity to which the trust is related. Trustees are usually appointed in the document (instrument) which creates the trust.

A trustee may be held personally liable for certain problems which arise with the trust. For example, if a trustee does not properly invest trust monies to expand the trust fund, he or she may be liable for the difference. There are two main types of trustees, professional and non-professional. Liability is different for the two types.

The trustees are the legal owners of the trust's property. The trustees administer the affairs attendant to the trust. The trust's affairs may include investing the assets of the trust, ensuring trust property is preserved and productive for the beneficiaries, accounting for and reporting periodically to the beneficiaries concerning all transactions associated with trust property, filing any required tax returns on behalf of the trust, and other duties. In some cases, the trustees must make decisions as to whether beneficiaries should receive trust assets for their benefit. The circumstances in which this discretionary authority is exercised by trustees is usually provided for under the terms of the trust instrument. The trustee's duty is to determine in the specific instance of a beneficiary request whether to provide any funds and in what manner.

By default, being a trustee is an unpaid job. In modern times trustees are often lawyers, bankers or other professionals who will not work for free. Therefore, often a trust document will state specifically that trustees are entitled to reasonable payment for their work.

Beneficiaries

The beneficiaries are beneficial (or equitable) owners of the trust property. Either immediately or eventually, the beneficiaries will receive income from the trust property, or they will receive the property itself. The extent of a beneficiary's interest depends on the wording of the trust document. One beneficiary may be entitled to income (for example, interest from a bank account), whereas another may be entitled to the entirety of the trust property when he attains the age of twenty-five years. The settlor has much discretion when creating the trust, subject to some limitations imposed by law.

Purposes

Common purposes for trusts include: #Privacy. Trusts may be created purely for privacy. The terms of a will are public and the terms of a trust are not. In some families this alone makes use of trusts ideal. #Spendthrift Protection. Trusts may be used to protect beneficiaries (for example, one's children) against their own inability to handle money. It is not unusual for an individual to create an inter vivos trust with a corporate trustee who may then disburse funds only for causes articulated in the trust document. These are especially attractive for spendthrifts. In many cases a family member or friend has prevailed upon the spendthrift/settlor to enter into such a relationship. However, over time, courts were asked to determine the efficacy of spendthrift clauses as against the trust beneficiaries seeking to engage in such assignments, and the creditors of those beneficiaries seeking to reach trust assets. A case law doctrine developed whereby courts may generally recognize the efficacy of spendthrift clauses as against trust beneficiaries and their creditors, but not against creditors of a settlor. #Wills and Estate Planning. Trusts frequently appear in wills (indeed, technically, the administration of every deceased's estate is a form of trust). A fairly conventional will, even for a comparatively poor person, often leaves assets to the deceased's spouse (if any), and then to the children equally. If the children are under 18, or under some other age mentioned in the will (21 and 25 are common), a trust must come into existence until the contingency age is reached. The executor of the will is (usually) the trustee, and the children are the beneficiaries. The trustee will have powers to assist the beneficiaries during their minority. #Charities. In some common law jurisdictions all charities must take the form of trusts. In others, corporations may be charities also, but even there a trust is the most usual form for a charity to take. In most jurisdictions, charities are tightly regulated for the public benefit (in England, for example, by the Charity Commission). #Unit Trusts. The trust has proved to be such a flexible concept that it has proved capable of working as an investment vehicle: the unit trust. #Pension Plans. Pension plans are typically set up as a trust, with the employer as settlor, and the employees and their dependents as beneficiaries. #Remuneration Trusts. Trusts for the benefit of directors and employees or companies or their families or dependents. This form of trust was developed by Paul Baxendale-Walker and has since gained widespread use. #Corporate Structures. Complex business arrangements, most often in the finance and insurance sectors, sometimes use trusts among various other entities (e.g. corporations) in their structure. #Asset Protection. The principle of "asset protection" is for a person to divorce himself or herself personally from the assets he or she would otherwise own, with the intention that future creditors will not be able to attack that money, even though they may be able to bankrupt him or her personally. One method of asset protection is the creation of a discretionary trust, of which the settlor may be the protector and a beneficiary, but not the trustee and not the sole beneficiary. In such an arrangement the settlor may be in a position to benefit from the trust assets, without owning them, and therefore without them being available to his creditors. Such a trust will usually preserve anonymity with a completely unconnected name (e.g. "The Teddy Bear Trust"). The above is a considerable simplification of the scope of asset protection. It is a subject which straddles ethical boundaries. Some asset protection is legal and (arguably) moral, while some asset protection is illegal and/or (arguably) immoral. #Tax Planning. The tax consequences of doing anything using a trust are usually different from the tax consequences of achieving the same effect by another route (if, indeed, it would be possible to do so). In many cases the tax consequences of using the trust are better than the alternative, and trusts are therefore frequently used for legal tax avoidance.For an example see the "nil-band discretionary trust", explained at Inheritance Tax (United Kingdom). #Co-ownership. Ownership of property by more than one person is facilitated by a trust. In particular, ownership of a matrimonial home is commonly effected by a trust with both partners as beneficiaries and one, or both, owning the legal title as trustee.

Types

Trusts go by many different names, depending on the characteristics or the purpose of the trust. Because trusts often have multiple characteristics or purposes, a single trust might accurately be described in several ways. For example, a living trust is often an express trust, which is also a revocable trust, and might include an incentive trust, and so forth.

Constructive trust. Unlike an express trust, a constructive trust is not created by an agreement between a settlor and the trustee. A constructive trust is imposed by the law as an "equitable remedy." This generally occurs due to some wrongdoing, where the wrongdoer has acquired legal title to some property and cannot in good conscience be allowed to benefit from it. A constructive trust is, essentially, a legal fiction. For example, a court of equity recognizing a plaintiff's request for the equitable remedy of a constructive trust may decide that a constructive trust has been created and simply order the person holding the assets to deliver them to the person who rightfully should have them. The constructive trustee is not necessarily the person who is guilty of the wrongdoing, and in practice it is often a bank or similar organization.

Dynasty Trust also known as a Generation-skipping trust. A type of trust in which assets are passed down to the grantor's grandchildren, not the grantor's children. The children of the grantor never take title to the assets. This allows the grantor to avoid the estate taxes that would apply if the assets were transferred to his or her children first. Generation-skipping trusts can still be used to provide financial benefits to a grantor's children, however, because any income generated by the trust's assets can be made accessible to the grantor's children while still leaving the assets in trust for the grandchildren.

Express trust. An express trust arises where a settlor deliberately and consciously decides to create a trust, over their assets, either now, or upon his or her later death. In these cases this will be achieved by signing a trust instrument, which will either be a will or a trust deed. Almost all trusts dealt with in the trust industry are of this type. They contrast with resulting and constructive trusts. The intention of the parties to create the trust must be shown clearly by their language or conduct. For an express trust to exist, there must be certainty to the objects of the trust and the trust property. In the USA Statute of Frauds provisions require express trusts to be evidenced in writing if the trust property is above a certain value, or is real estate.

Fixed trust. In a fixed trust, the entitlement of the beneficiaries is fixed by the settlor. The trustee has little or no discretion. Common examples are:

*a trust for a minor ("to x if she attains 21");

*a life interest ("to pay the income to x for her lifetime"); and

*a remainder ("to pay the capital to y after the death of x")

Hybrid trust. A hybrid trust combines elements of both fixed and discretionary trusts. In a hybrid trust, the trustee must pay a certain amount of the trust property to each beneficiary fixed by the settlor. But the trustee has discretion as to how any remaining trust property, once these fixed amounts have been paid out, is to be paid to the beneficiaries.

Implied trust. An implied trust, as distinct from an express trust, is created where some of the legal requirements for an express trust are not met, but an intention on behalf of the parties to create a trust can be presumed to exist. A resulting trust may be deemed to be present where a trust instrument is not properly drafted and a portion of the equitable title has not been provided for. In such a case, the law may raise a resulting trust for the benefit of the grantor (the creator of the trust). In other words, the grantor may be deemed to be a beneficiary of the portion of the equitable title that was not properly provided for in the trust document.

Incentive trust. A trust that uses distributions from income or principal as an incentive to encourage or discourage certain behaviors on the part of the beneficiary. The term "incentive trust" is sometimes used to distinguish trusts that provide fixed conditions for access to trust funds from discretionary trusts that leave such decisions up to the trustee.

Inter vivos trust (or living trust). A settlor who is living at the time the trust is established creates an inter vivos trust.

Irrevocable trust. In contrast to a revocable trust, an irrevocable trust is one in which the terms of the trust cannot be amended or revised until the terms or purposes of the trust have been completed. Although in rare cases, a court may change the terms of the trust due to unexpected changes in circumstances that make the trust uneconomical or unwieldy to administer, under normal circumstances an irrevocable trust may not be changed by the trustee or the beneficiaries of the trust.

Offshore trust. Strictly speaking, an offshore trust is a trust which is resident in any jurisdiction other than that in which the settlor is resident. However, the term is more commonly used to describe a trust in one of the jurisdictions known as offshore financial centers or, colloquially, as tax havens. Offshore trusts are usually conceptually similar to onshore trusts in common law countries, but usually with legislative modifications to make them more commercially attractive by abolishing or modifying certain common law restrictions. By extension, "onshore trust" has come to mean any trust resident in a high-tax jurisdiction.

Personal injury trust. A personal injury trust is any form of trust where funds are held by trustees for the benefit of a person who has suffered an injury and funded exclusively by funds derived from payments made in consequence of that injury.

Private and public trusts. A private trust has one or more particular individuals as its beneficiary. By contrast, a public trust (also called a charitable trust) has some charitable end as its beneficiary. In order to qualify as a charitable trust, the trust must have as its object certain purposes such as alleviating poverty, providing education, carrying out some religious purpose, etc. The permissible objects are generally set out in legislation, but objects not explicitly set out may also be an object of a charitable trust, by analogy. Charitable trusts are entitled to special treatment under the law of trusts and also the law of taxation.

Protective trust. Here the terminology is different between the UK and the USA:

*In the UK, a protective trust is a life interest which terminates on the happening of a specified event such as the bankruptcy of the beneficiary or any attempt by him to dispose of his interest. They have become comparatively rare.

*In the USA, a protective trust is a type of trust that was devised for use in estate planning. (In another jurisdiction this might be thought of as one type of asset protection trust.) Often a person, A, wishes to leave property to another person B. A however fears that the property might be claimed by creditors before A dies, and that therefore B would receive none of it. A could establish a trust with B as the beneficiary, but then A would not be entitled to use of the property before they died. Protective trusts were developed as a solution to this situation. A would establish a trust with both A and B as beneficiaries, with the trustee instructed to allow A use of the property until they died, and thereafter to allow its use to B. The property is then safe from being claimed by A's creditors, at least so long as the debt was entered into after the trust's establishment. This use of trusts is similar to life estates and remainders, and are frequently used as alternatives to them.

Purpose trust. Or, more accurately, non-charitable purpose trust (all charitable trusts are purpose trusts). Generally, the law does not permit non-charitable purpose trusts outside of certain anomalous exceptions which arose under the eighteenth century common law (and, arguable, Quistclose trusts). Certain jurisdictions (principally, offshore jurisdictions) have enacted legislation validating non-charitable purpose trusts generally.

Resulting trust. A resulting trust is a form of implied trust which occurs where (1) a trust fails, wholly or in part, as a result of which the settlor becomes entitled to the assets; or (2) a voluntary payment is made by A to B in circumstances which do not suggest gifting. B becomes the resulting trustee of A's payment.

Revocable trust. A trust of this kind may be amended, altered or revoked by its settlor at any time, provided the settlor is not mentally incapacitated. Revocable trusts are becoming increasingly common in the US as a substitute for a will to minimize administrative costs associated with probate and to provide centralized administration of a person's final affairs after death.

Secret trust. A post mortem trust constituted externally from a will but imposing obligations as a trustee on one, or more, legatees of a will.

Simple trust. This term is only used in the US, but in that jurisdiction has two distinct meanings:

*In a simple trust the trustee has no active duty beyond conveying the property to the beneficiary at some future time determined by the trust. This is also called a bare trust. All other trusts are special trusts where the trustee has active duties beyond this.

*A simple trust in Federal income tax law is one in which, under the terms of the trust document, all net income must be distributed on an annual basis.

Special trust. In the US, a special trust contrasts with a simple trust (see above).

A Spendthrift trust is a trust put into place for the benefit of a person who is unable to control their spending. It gives the trustee the power to decide how the trust funds may be spent for the benefit of the beneficiary.

Standby Trust or Pourover Trust. The trust is empty at creation during life and the will transfers the property into the trust at death. This is a statutory trust.

Testamentary trust or Will Trust. A trust created in an individual's will is called a testamentary trust. Because a will can become effective only upon death, a testamentary trust is generally created at or following the date of the settlor's death.

Unit trust. A unit trust is a trust where the beneficiaries (called unitholders) each possess a certain share (called units) and can direct the trustee to pay money to them out of the trust property according to the number of units they possess. A unit trust is a vehicle for collective investment, rather than disposition, as the person who gives the property to the trustee is also the beneficiary.

While the preceding list is a great starting point in trust education, this is an ever-expanding field of law. New types of trusts continue to be created, as the IRS continues to expand tax law, and individuals seek to find new ways to properly transfer their wealth to individuals, charities, etc.

Terms

Appointment. In trust law, "appointment" often has its everyday meaning. It is common to talk of "the appointment of a trustee", for example. However, "appointment" also has a technical trust law meaning, either:

*the act of appointing (i.e. giving) an asset from the trust to a beneficiary (usually where there is some choice in the matter—such as in a discretionary trust); or

*the name of the document which gives effect to the appointment.

:The trustee's right to do this, where it exists, is called a power of appointment. Sometimes, a power of appointment is given to someone other than the trustee, such as the settlor, the protector, or a beneficiary.

Protector. A protector may be appointed in an express, inter vivos trust, as a person who has some control over the trustee—usually including a power to dismiss the trustee and appoint another. The legal status of a protector is the subject of some debate. No-one doubts that a trustee has fiduciary responsibilities. If a protector also has fiduciary responsibilities then the courts—if asked by beneficiaries—could order him or her to act in the way the court decrees. However, a protector is unnecessary to the nature of a trust—many trusts can and do operate without one. Also, protectors are comparatively new, while the nature of trusts has been established over hundreds of years. It is therefore thought by some that protectors have fiduciary duties, and by others that they do not. The case law has not yet established this point.

Trustee. A person (either an individual, a corporation or more than one of either) who administers a trust. A trustee is considered a fiduciary and owes the highest duty under the law to protect trust assets from unreasonable loss for the trust's beneficiaries.

Tax and regulation

Trusts can be used to avoid taxes and regulation, although in the United States the IRS allows trusts to be taxed as corporations, partnerships, or not at all depending on the circumstances.

Inter vivos trusts in the United States

In the United States, a living trust refers to a trust that may be revocable by the trust creator or settlor (known by the IRS as the Grantor). Living trusts are often used because they may allow assets to be passed to heirs without going through the process of probate. Avoiding probate will normally save substantial costs (the probate courts, in some states, charge a fee based on a percentage net worth of the deceased), time, and maintain privacy (the probate records are available to the public, while distribution through a trust is private). Both living trusts and wills can also be used to plan for unforeseen circumstances such as incapacity or disability, by giving discretionary powers to the trustee or executor of the will.

The grantor/settlor may also serve as a trustee or co-trustee. In the case where two or more co-trustees serve, the trust instrument may provide that either trustee may act alone on behalf of the trust or require both co-trustees to act/sign. The trust instrument may also provide that the other co-trustee shall act as sole trustee if the grantor becomes incompetent and is unable to continue administering the trust.

There are also some negative aspects to a living trust in the United States. Beneficiaries do not save on federal estate or state inheritance taxes. Setting up a trust may be expensive, and the expense is immediate, not delayed till after the grantor's death. The legal drafting of the trust instrument, which creates the trust, usually costs much more than the legal drafting of a will. Trust administration can be more expensive than the administration of a will in the long run, as most state laws allow a fee of 1% of the estate's gross assets to be paid to the trustee for every year the trust is in existence. The fees for probate estate administration under a will are usually from 1% of the gross estate (for very large estates) to 4% of the gross estate (for very small estates), but this is a one-time fee, not yearly. The same one-time fees apply when a person dies without a will or a trust (dies Intestate): State laws require that an intestate probate be opened at the local courthouse, that the decedent's closest relatives be identified, located and notified, and that the decedent's real and personal property be collected, accounted, and distributed to said relatives.

Important safeguards contained in the probate laws of most U.S. jurisdictions do not apply to trust administration. If the decedent leaves a will, his/her probate proceedings must be conducted under the auspices of the probate court. Unlike trusts, wills must be signed by two to three witnesses, the number depending on state law. Several safety provisions of probate law in the U.S. protect the decedent's assets from mismanagement, loss, and embezzlement, such as the requirement that the executor of the will be bonded, the real property insured, the executor’s sale of real estate monitored, and itemized accountings filed with the court during and at the end of probate administration. These procedures do not occur when a decedent's estate passes by trust. Trusts are conducted in private, unless a conflict develops and one of the parties seeks resolution by a court order.

Living trusts generally do not shelter assets from the U.S. Federal estate tax. A married couple having a trust can, however, effectively double the estate tax exemption amount (the amount of net worth above which an estate tax is levied) by setting up the trust with a formula clause. A formula clause takes advantage of the unlimited spousal deduction allowed under the internal revenue code. When the first married individual dies, the trust pays out to the beneficiaries an amount up to the total unified credit. The amount is set by the formula clause, not strict dollar amounts, because the unified credit increases over time. Without a formula clause, the unified credit could be wasted. The remaining amount of the estate (after the unified credit is exhausted) is paid to the spouse. Thus, when the first spouse dies, no estate tax is owed (just as if the individual died intestate). However, when the second spouse dies, the distribution to the trust beneficiaries is subject to that decedent's unified credit. The rest is subject to estate tax. If the married couple had died intestate, the first decedent's unified credit is lost because everything is transferred to the spouse upon his/her death. A formula clause is necessary only if the value of the estate is larger than the amount of the unified credit. Due to changes in Federal Estate Tax Laws that affect the year 2010 and later, using the Unified Credit formula may have some unintended consequences for persons who die during 2010 and later.

For a living trust, the grantor/settlor will often retain some level of relevance to the trust, usually by appointing him- or herself as the trustee and/or as the protector under the trust instrument (in jurisdictions where protectors are recognised). Living trusts also, in practical terms, tend to be driven to large extent by tax considerations. If a living trust fails, the property will usually be held for the grantor/settlor on resulting trusts, which in some notable cases, has had catastrophic tax consequences. A living trust is not under the control and supervision of the probate court, and property held by such a trust is not part of a decedent's probated estate.

Inter vivos trusts in South Africa

In South Africa, there are basically three types of trusts. These are living trusts (in South Africa called inter vivos trusts), testamentary trusts and bewind trusts.

Testamentary trusts are created at the winding up of a deceased estate following a specific stipulation in the deceased person's will that a trust must be set up. Testamentary trusts are usually created to hold assets on behalf of minor children, since minor children can not in terms of South African law inherit anything (in the absence of a trust, assets from the deceased estate left to minor children are sold, and the money is paid to them when they reach adulthood). Bewind trusts are created as trading vehicles providing trustees with limited liability and certain tax advantages.

There are two types of living trusts in South Africa, namely vested trusts and discretionary trusts. In vested trusts, the benefits of the beneficiaries are set out in the trust deed, whereas in discretionary trusts the trustees have full discretion at all times as to how much and when each beneficiary is to benefit.

Parties to the trust

There are three parties in a living trust, namely the founder, the trustees and the beneficiaries. The trust is managed by the trustees for the benefit of the beneficiaries. The beneficiaries can be any legal persons, including living people, other trusts, and registered businesses. Trustees may also be beneficiaries.

Establishing a living trust

The trust is created by drafting a trust deed (usually in co-operation with an attorney specialising in trust law) and registering the trust with the local High Court. The trust becomes effective as soon as it is registered.

Asset protection

Until recently, there were tax advantages to living trusts in South Africa, although most of these advantages have fallen away with new legislation. The remaining advantage of a living trust is the protection of assets from creditors. In an ideal situation, since assets held by the trust aren't owned by the trustees or the beneficiaries, the creditors of trustees or beneficiaries can have no claim against the trust (there are exceptions). A common scenario of using living trusts for asset protection is a husband and wife acting as trustees along with a third unrelated trustee. The trust is granted a loan equal to the value of their assets, then the trust buys their assets using the loan, and finally the trust pays off the loan over time. When any of trustees die, the trust and any assets owned by it, remain unaffected.

Assets transferred into a living trust remain at risk from external creditors for 6 months if the previous owner of the assets is solvent at the time of transfer, or 24 months if he/she is insolvent at the time of transfer. After 24 months, creditors have no claim against assets in the trust, although they can attempt to attach the loan account, thereby forcing the trust to sell its assets.

Assets can be transferred into the living trust by selling it to the trust (through a loan granted to the trust) or donating cash to it (any person can donate R30 000 per year tax free; 20% donations tax applies to further donations within the year).

Tax considerations

In terms of South African tax law, living trusts are considered tax payers. Two types of tax apply to living trusts, namely income tax and capital gains tax (CGT). A trust pays income tax at a flat rate of 40% (individuals pay according to income scales, usually less than 20%). The trust's income can, however, be taxed in the hands of either the trust or the beneficiary. A trust pays CGT at the rate of 20% (individuals pay 10%). Trusts do not pay deceased estate tax (although trusts may be required to pay back outstanding loans to a deceased estate, in which the loan amounts are taxable with deceased estate tax).

The taxpayer whose residence has been "locked" in to a trust has now been given another opportunity to take advantage of these CGT exemptions. The Taxation Law Amendment Act was promulgated on 30 September 2009 and takes effect on 1 January 2010 allowing a window period of 2 (two) years from 1 January 2010 to 31 December 2011 for the opportunity of a natural person to take transfer of the residence with advantage of no transfer duty being payable or CGT consequences. Whilst taxpayers can take advantage of this opening of a window of opportunity is not likely that it will ever become available thereafter.

See also

Blind trust

Charitable trust

Fideicommissum

Foundation (charity)

Knight v Knight

Rabbi trust

Settlor

STEP (Society of Trust and Estate Practitioners), the international professional association for the trust industry

Testamentary trust

Trusts and estates

Fiducie

Jurisdiction specific:

Argentinian law number 24.441 of 1994.

Australian trust law

Henson trust

Italian trust law

Trust law in Civil law jurisdictions

Trust law in England and Wales

Trust Law of the People's Republic of China

United States trust law

Waqf

Notes

References

;Books

A Hudson, Equity and Trusts (3rd edn Cavendish Publishing 2003) ISBN 1-85941-729-9

C Mitchell and DJ Hayton, Hayton and Marshall's Commentary and Cases on the Law of Trusts and Equitable Remedies (Sweet & Maxwell, 2005) 12th edn

C Mitchell, DJ Hayton and P Matthews, Underhill and Hayton's Law Relating to Trusts and Trustees (17th edn Butterworths 2006)

Category:Common law Category:Wills and trusts Category:Equity Category:Inheritance

Name	Sri Sathya Sai Baba
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Caption	(1946)
Birth date	November 23, 1926
Birth place	Puttaparthi, Madras Presidency, British India
Death date	April 24, 2011
Death place	Puttaparthi, Andhra Pradesh, India
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Sri Sathya Sai Baba (), born as Sathyanarayana Raju (23 November 1926 24 April 2011), was an Indian guru, spiritual figure, mystic, philanthropist, and educator. He claimed to be – and his followers believed him to be – the reincarnation of Sai Baba of Shirdi, a spiritual saint and miracle worker who died in 1918 and whose teachings were an eclectic blend of Hindu and Muslim beliefs. The materializations of vibhuti (holy ash) and other small objects such as rings, necklaces and watches by Sathya Sai Baba were a source of both fame and controversy; devotees considered them signs of divinity, while skeptics viewed them as simple conjuring tricks. By the latter half of the twentieth century, Sai Baba was enjoying tremendous popularity around the world, with widespread faith, fame, criticism and controversies transforming him into a cultural icon. His photographs are displayed in millions of homes and on the dashboards of cars, and lockets bearing his photo are worn by many as a symbol of good luck.

Devotees, Institutions and Finances

The Sathya Sai Organisation reports that there are an estimated 1,200 Sathya Sai Baba Centers in 114 countries. However, the number of active Sathya Sai Baba followers is hard to determine. up to nearly 100 million. In India itself, Sai Baba drew followers predominantly from the upper-middle-class, the urban sections of society who have the "most wealth, education and exposure to Western ideas." He was a cultural icon in India and drew an audience with presidents and prime ministers from India and beyond who became his devotees; in 2002, he claimed to have followers in 178 countries. In 2011, shortly before his death, he was listed by Watkins Review as one of the 100 most spiritually influential people in the world.

Sathya Sai Baba founded a large number of schools and colleges, hospitals, and other charitable institutions in India and abroad, the total value of which is usually estimated at Rs. 40,000 crore (USD 8.9 billion). However, estimates as high as 1.4 trillion rupees (about USD 35bn) have also been made. After his death, the non-transparent

On 17th June, 2011, officials from the Sai Baba Society opened his private room which had been closed since his death, and found 98 kgs of gold ornaments, approximate value Rs 21 crore, 307 kgs of silver ornaments, approximate value Rs 1.6 crore, and Rs 11.6 crore in cash. The total value is believed to exceed 7.7 million US dollars.

Parallels with the transition after the passing of Osho (Bhagwan Shree Rajneesh) or Mata Anandamayi indicate that the transition in managing the large organization may not be easy.

Life

Early life and proclamation

(pictured).]] Almost everything known about Sathya Sai Baba's early life stems from the hagiography that grew around him, the presentation of narratives that hold special meaning to his devotees and are considered evidence of his divine nature. According to his followers, then, Sathyanarayana Raju was born to Easwaramma and Peddavenkama Raju Ratnakaram in the village of Puttaparthi, in what was the Madras Presidency of British India. His birth, which his mother Eswaramma asserted was by miraculous conception, was also said to be heralded by miracles. As a child, he was described as "unusually intelligent" and charitable, though not an exceptional student, as his interests were more of a spiritual nature.

On 8 March 1940, while living with his elder brother Seshama Raju in Uravakonda, a small town near Puttaparthi, Sathya was apparently stung by a scorpion. "He began to sing Sanskrit verses, a language of which he had no prior knowledge." Concerned, they took him to many priests, "doctors" and exorcists. His father became furious at seeing this, thinking his son was bewitched. He took a stick and threatened to beat him if Sathya did not reveal who he really was. To this Sathya announced calmly and firmly "I am Sai Baba", a reference to Sai Baba of Shirdi.

Later that year, Sathya Sai Baba declared that he had no worldly relationship with anyone The construction of Prashanthi Nilayam, the current ashram, began in 1948 and was completed in 1950.

In 1963, Sathya Sai Baba suffered a stroke and four severe heart attacks. It is believed that he healed himself of these in front of the thousands of people gathered in Prasanthi Nilayam praying for his recovery. On recovering, Sai Baba gave a discourse announcing that he would be reborn as Prema Sai Baba in the neighboring state of Karnataka. He stated he would be born again eight years after his death at the age of 96.

On 29 June 1968, Sathya Sai Baba made his first and only trip overseas, to Kenya and Uganda. During a discourse in Nairobi, Sathya Sai Baba stated, "I have come to light the lamp of Love in your hearts, to see that it shines day by day with added luster. I have not come on behalf of any exclusive religion. I have not come on a mission of publicity for a sect or creed or cause, nor have I come to collect followers for a doctrine. I have no plan to attract disciples or devotees into my fold or any fold. I have come to tell you of this unitary faith, this spiritual principle, this path of Love, this virtue of Love, this duty of Love, this obligation of Love." In 1968, he established Dharmakshetra or Sathyam Mandir in Mumbai.

In March 1995 Sathya Sai Baba started a project to provide drinking water to 1.2 million people in the drought-prone Rayalaseema region in the Anantapur district of Andhra Pradesh.

On 28 March 2011, Sathya Sai Baba was admitted to the Sri Sathya Sai Super Speciality Hospital at Prashantigram at Puttaparthi, following respiration-related problems. After nearly a month of hospitalisation, during which his condition progressively deteriorated, Sai Baba died on 24 April at 7:40 IST, aged 84.

Sathya Sai Baba had predicted that he would die at age 96 and would remain healthy until then. After he died, some devotees suggested that he may have been referring to that many lunar years, rather than solar years, and using the Indian way of accounting for age, which counts the year to come as part of the person's life. Other devotees have spoken of his anticipated resurrection, reincarnation or awakening.

His body lay in state for two days, and was buried on 27 April 2011. An estimated 500,000 people attended the burial, among them the Indian Prime Minister, Manmohan Singh, Congress president Sonia Gandhi, Gujarat Chief Minister Narendra Modi and Union Ministers S. M. Krishna and Ambika Soni, as well as other political leaders and prominent figures.

Political leaders who offered their condolences included the Indian Prime Minister Manmohan Singh. Famous cricketer Sachin Tendulkar canceled his birthday celebrations. The Hindu newspaper reported that "Sri Sathya Sai Baba's propagation of spiritualism and preaching of Hindu philosophy never came in the way of his commitment to secular beliefs." The Government of Karnataka declared 25 and 26 April as days of mourning, and Andhra Pradesh declared 25, 26 and 27 April as days of mourning. saying

has to give up his religion or deity."}}

Internationally, Sathya Sai Baba devotees gather daily, or weekly on Sundays or Thursdays or both, to sing group devotional songs, prayer, spiritual meditation, service to the community (Seva), and to participate in "Education in Human Values" (SSEHV)), a planetarium, a railway station, a hill-view stadium, an administrative building, an airport, an indoor sports stadium and more. High ranking Indian politicians, like the former President Dr. A. P. J. Abdul Kalam, former Prime Minister Atal Bihari Vajpayee, Andhra Pradesh former Chief Minister Konijeti Rosaiah and Karnataka Chief Minister B. S. Yeddyurappa have been official guests at the ashram in Puttaparthi. On Sathya Sai Baba's 80th birthday celebration, it was reported that well over a million people attended, including 13,000 delegates from India and 180 other countries.

Sathya Sai Baba resided much of the time in his main ashram called Prashanthi Nilayam (Abode of Highest Peace) at Puttaparthi. In the hot summer he used to leave for his other ashram, called Brindavan, in Kadugodi, Whitefield, a town on the outskirts of Bangalore. Occasionally he visited his Sai Shruti ashram in Kodaikanal.

Sathya Sai Baba established three primary mandirs (spiritual centres) in India. The first mandir, founded in Mumbai in 1968, is referred to as either "Dharmakshetra" or "Sathyam". The second centre, established in Hyderabad in 1973, is referred to as "Shivam". The third centre, inaugurated on 19 January 1981 in Chennai, is referred to as "Sundaram".

Institutions, organisations and projects

Sathya Sai Baba supported a variety of free educational institutions, hospitals, and other charitable works in over 166 countries. Sri Sathya Sai University of which Baba was the Chancellor, has three campuses, one at Puttaparthi for men, one at Whitefield, Bangalore for men and one at Anantapur for women. His charity supports an institute for Indian classical music called the Sri Sathya Sai Mirpuri College of Music. Baba's educational institutions aim to impart character education along with excellence in academics with emphasis on human values and ethics.

Sathya Sai Baba chaired the Muddenahalli-Sathya Sai Loka Seva School and Sri Sathya Sai Loka Seva Trust Educational Institutions in Muddenahalli-Kanivenarayanapura regions. In addition, a Sathya Sai Baba University and Medical School as well as a world class hospital and research institute are being constructed on over to serve the destitute population. Baba said that the campus will be modeled after Puttaparthi and will infuse spirituality with academics.

The Sri Sathya Sai Institute of Higher Medical Sciences in Puttaparthi is a 220 bed facility that provides free surgical and medical care and was inaugurated by Prime Minister Narasimha Rao on 22 November 1991. The hospital was inaugurated on 19 January 2001 by Prime Minister Atal Behari Vajpayee. The hospital has provided free medical care to over 250,000 patients.

The Sri Sathya Sai General Hospital was opened in Whitefield, Bangalore, in 1977 and provides complex surgeries, food and medicines free of cost. The hospital has treated over 2 million patients.

The Sri Sathya Sai Central Trust runs several general hospitals, two specialty hospitals, eye hospitals and mobile dispensaries and conducts medical camps in rural and slum areas in India. The Trust has also funded several major drinking water projects. One project completed in 1996 supplies water to 1.2 million people in about 750 villages in the drought-prone Anantapur district in Andhra Pradesh. The second drinking water project, completed in 2004, supplies water to Chennai through a rebuilt waterway named "Sathya Sai Ganga Canal". Tamil Nadu Chief Minister M. Karunanidhi praised the Chennai water project and Sai Baba's involvement. Other completed water projects include the Medak District Project benefiting 450,000 people in 179 villages and the Mahbubnagar District Project benefitting 350,000 people in 141 villages. In January 2007, the Sri Sathya Sai Central Trust said it would start a drinking water project in Latur, Maharashtra. In 2008, 2 million people in the state of Orissa were affected by floods. As a relief measure, Sri Sathya Sai Seva Organization, has built 699 houses as a part of their first phase in 16 villages by March 2009.

Sathya Sai Baba's Educare program seeks to found schools throughout the world with the goal of educating children in the five human values. According to the Sai Educare site, schools have been founded in 33 countries, including Australia, Mexico, the United Kingdom and Peru. The Times of Zambia states, "The positive influence of Sathya Sai is unprecedented in the annals of education in Zambia. Sai Baba's education ideals as embodied in his human values-based approach in education are an eye opener to educationists in Zambia."

In Canada, the Fraser Institute, an independent Canadian research and educational organization, ranked the Sathya Sai School of Canada as one of the top 37 elementary schools in Ontario. The Sathya Sai School scored a perfect 10 out of 10 in the Institute's overall rating for academic performance.

On 23 November 1999, the Department of Posts, Government of India, released a postage stamp and a postal cover in recognition of the service rendered by Sathya Sai Baba in addressing the problem of providing safe drinking water to the rural masses.

On 23 November 2001, the digital radio network Radio Sai Global Harmony was launched through the World Space Organization, United States. Dr Michael Oleinikof Nobel (distant relative to Alfred Nobel and one of the patrons for the radio network) said that the radio network would spread Sathya Sai Baba's message of global harmony and peace.

In January 2007, an event was held in Chennai Nehru stadium organised by the Chennai Citizens Conclave to thank Sathya Sai Baba for the 200 crore water project which brought water from the River Krishna in Andhra Pradesh to Chennai city. Four chief ministers attended the function.

Reputation for miracles and clairvoyance

Devotees said they observed Sathya Sai Baba manifesting vibhuti (holy ash), and sometimes food and "small objects" such as rings, necklaces and watches. In books, magazines, filmed interviews and articles, Sathya Sai Baba's followers reported miracles of various kinds that they attributed to him. Internationally, devotees reported that vibhuti, kumkum, turmeric powder, holy water, Shiva lingas, statues of deities (brass and gold), sugar candy, fruits, herbs, amrita (a fragrant, nectar-like honey), gems, colored string, writings in ash and various other substances spontaneously manifested and materialized on the walls, furniture, pictures and altars of Sathya Sai Baba. Sathya Sai Baba's devotees also believed that he relieved them from pain, by transferring it to himself.

The first ever record of Baba's miracles by a foreigner was made by Howard Murphet in his 1971 book, Sai Baba – Man Of Miracles. The retired Icelandic psychology professor Erlendur Haraldsson wrote in 1997 that he did not obtain Sathya Sai Baba's permission to study him under controlled circumstances, but that he investigated the guru's alleged miracles and manifestations through interviews with devotees and ex-devotees. Some of the reported miracles included levitation (both indoors and outdoors), bilocation, physical disappearances, changing granite into sugar candy, changing water into another drink, changing water into gasoline, producing objects on demand, changing the color of his gown while wearing it, multiplying food, healing acute and chronic diseases, appearing in visions and dreams, making different fruits appear on any tree hanging from actual stems, controlling the weather, physically transforming into various deities and physically emitting brilliant light. Haraldsson wrote that the largest allegedly materialized object that he saw was a mangalsutra necklace, 32 inches long, 16 inches long on each side. He stated that some miracles attributed to Sathya Sai Baba resembled the ones described in the New Testament, but that although healings certainly figured in Sai Baba's reputation, healings did not play as prominent a role in Sathya Sai Baba's activities as in those of Jesus.

Sathya Sai Baba explained the phenomenon of manifestation as being an act of divine creation, but refused to have his materializations investigated under experimental conditions. In a 1974 discourse, he stated, "The optical sense cannot visualize the truth. It gives only false and fogged information. For example, there are many who observe my actions and start declaring that my nature is such and such." He said of his "miracles", "those who profess to have understood me, the scholars, the yogis, the pundits, the jnanis, all of them are aware only of the least important, the casual external manifestation of an infinitesimal part of that power, namely, the "miracles"! This has been the case in all ages. People may be very near [physically] to the Avathar, but they live out their lives unaware of their fortune; they exaggerate the role of miracles, which are as trivial, when compared to my glory and majesty, as a mosquito is in size and strength to the elephant upon which it squats. Therefore, when you speak about these 'miracles,' I laugh within myself out of pity that you allow yourself so easily to lose the precious awareness of my reality." Sathya Sai Baba said that he ignored Narasimhaiah's challenge because he felt his approach was improper, adding that "Science must confine its inquiry only to things belonging to the human senses, while spiritualism transcends the senses. If you want to understand the nature of spiritual power you can do so only through the path of spirituality and not science. What science has been able to unravel is merely a fraction of the cosmic phenomena ..." Narasimhaiah's committee was dissolved in August 1977. According to Erlendur Haraldsson, the formal challenge from the committee came to a dead end because of the negative attitude of the committee, and perhaps because of all the fanfare surrounding it. Narasimhaiah held the fact that Sathya Sai Baba ignored his letters to be one of several indications that his miracles were fraudulent. As a result of this episode, a public debate raged for several months in Indian newspapers.

Indian rationalist Basava Premanand stated in a BBC documentary that he had been investigating Sathya Sai Baba since 1968 and that, in his opinion, Sai Baba faked his materialisations. He sued Sai Baba in 1986 for violations of the Gold Control Act, citing Sathya Sai Baba's purported "materializations" of gold objects. When the case was dismissed, Premanand unsuccessfully appealed on the grounds that claimed spiritual power is not a defense recognized in law. The magician James Randi wrote about Sathya Sai Baba and Premanand, "Examination of films and videotapes of Sai Baba's actual performances show them to be simple sleight of hand, exactly the same as the sort used by the other Indian jaduwallahs, or 'street conjurors.' Sai Baba has never submitted to an examination of his abilities under controls, so his claims are totally unproven. Parsimony applies here. India's leading debunker of the claims of the god-men who infest that country, the famous Premanand, has duplicated all of Sai Baba's tricks and tours the world demonstrating these feats."

A 1995 TV documentary Guru Busters, produced by filmmaker Robert Eagle for UK's Channel 4, similarly accused Sathya Sai Baba of faking his materializations. The clip from the film was mentioned in the Deccan Chronicle, on 23 November 1992, on a front page headline "DD Tape Unveils Baba Magic". However, Haraldsson stated that, on investigating the DD video, researchers did not find evidence of fake materialisation as claimed by Deccan chronicle. According to Haraldsson, the video was taken to a company which investigates corporate fraud. In spite of improving the graininess of the low quality video with enhanced filters and running it through advanced image processing systems, Haraldsson stated the DD video did not provide firm evidence of sleight of hand.

In 1998, British journalist Mick Brown stated in his book The Spiritual Tourist that Sathya Sai Baba's claim of "resurrecting" the American devotee Walter Cowan in 1971 was probably untrue. His opinion was based on letters from the attending doctors presented in the magazine Indian Skeptic, published by Premanand. Brown also related, in the same book, his experiences with manifestations of vibuthi from Sathya Sai Baba's pictures in houses in London, which he felt were not fraudulent or the result of trickery. Documentaries produced by the BBC and the Danish Broadcasting Corporation, analyzing videos of the supposed miracles, suggested that they could be explained as sleight of hand.

In his book Redemptive Encounters: Three Modern Styles in the Hindu Tradition, Lawrence A. Babb wrote about Sathya Sai Baba, "Whoever he is, he is certainly more than the mere parlour magician many of his critics claim that he is." In a 2000 public discourse, Sathya Sai Baba said, "These teachings (the Vedas) are highly sacred. Today people are ready to believe all that they see on television and internet but do not repose their faith in the Vedic declarations. Internet is like a waste paper basket. Follow the 'innernet,' not the internet."

Unverified charges leveled against Sathya Sai Baba by detractors and ex-followers included money laundering, fraud in the performance of service projects, child sexual abuse and murder. In 2004, in the UK and internationally, the BBC and other national networks aired a documentary titled The Secret Swami, as part of its series "The World Uncovered". One central theme of the BBC documentary was Alaya Rahm's sexual abuse allegations against Sathya Sai Baba.

In 2006, Alaya Rahm filed a lawsuit for negligence against the Sathya Sai Baba Society in the Superior Court of California, and the Sathya Sai Baba Society filed a counterclaim against him in the same court. The trial was set for April 28, 2006, but on April 7 both Rahm and the Sai Baba Society agreed to withdraw their suits and not to bring the same cases against each other in the future. The instructions to the court read: "Please take notice that the above referenced matter has been settled in its entirety. The plaintiff has agreed to dismiss his complaint, with prejudice, and the cross-complainant has agreed to dismiss its cross-complaint, with prejudice. No economic consideration has been paid in exchange for either of these dismissals." Neither Sathya Sai Baba, nor any organizations associated with him, have been charged or convicted with sexual abuse or any other crime in a court of law. A second common response was that even if some of the allegations by critics were correct, they simply lacked the vision to understand things in their correct spiritual context, or were failing to understand the meaning of lila, Sathya Sai Baba's divine play. In the article Divine Downfall, published in the Daily Telegraph, Anil Kumar, the ex-principal of the Sathya Sai Educational Institute, said that he believed that the controversy was part of Baba's divine plan and that all great religious teachers had to face criticism during their lives. Anil Kumar also said that allegations had been leveled at Sathya Sai Baba since childhood, but with every criticism he had become more and more triumphant.

In an official letter made public in December 2001, Atal Bihari Vajpayee (then Prime Minister of India and a devotee of Sathya Sai Baba}}

The Times Of India on 26 December 2000 said that Sathya Sai Baba "lashed out at his detractors in a rare display of anger" while referring to criticism published in a magazine. The Times quoted him as saying, "Jesus Christ underwent many hardships, and was put to the cross because of jealousy. Many around him could not bear the good work he did and the large number of followers he gathered. One of his disciples, Judas, betrayed him. In those days there was one Judas, but today there are thousands. Just as that Judas was tempted to betray Jesus, the Judases of today, too, are bought out to lie. Jealousy was the motive behind the allegations levelled at him".

Sathya Sai Baba publicly responded to the allegations on 25 December 2000:

References

External links

Sathya Sai Baba

International Sai Organization

Discourses by Sathya Sai Baba

Books and publications by and on Sathya Sai Baba

Official digital radio channel run by Sri Sathya Sai Seva Organization

Category:1926 births Category:2011 deaths Category:Hindu gurus Category:Hindu saints Category:Hindu writers Category:Indian religious leaders Category:Indian spiritual writers Category:People claiming to have psychokinetic abilities Category:People considered avatars by their followers Category:People from Anantapur district Category:Self-declared messiahs Category:Spiritual teachers Category:Supernatural healing