Trusts may be used in a variety of circumstances, to achieve a variety of outcomes. This may include (but not be limited to) Estate and Succession Planning, Forced Heirship, Asset Protection, Charitable donations and can be particularly suitable for individuals resident and domiciled in different jurisdictions, Most commonly used Isle of Man Trusts include: Discretionary Trusts, Purpose Trusts, Life Interest or Interest in Possession Trusts, Charitable Trusts.
In common law (British) legal systems, a trust is a relationship whereby property (real or personal, tangible or intangible) is held by one party for the benefit of another. A trust conventionally arises when property 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, who transfers some or all of his/her property to a trustee, who holds that trust property (also called the principal or corpus) for the benefit of the beneficiary/ies.
The settlor is also sometimes called the trustor, grantor, donor, creator, or founder. In the case of the self-declared trust, the settlor and trustee is the same person. The trustee has legal title to the trust property but the beneficiaries have equitable title to the trust property (separation of control and ownership). The trustee owes a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property. The trustee may be either a natural person or a legal person (such as a company or a public body) 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 usually written down in a trust instrument or Deed. The terms of the trust must specify that property is to be transferred into the trust (certainty of subject-matter), and who the beneficiaries will be of that trust (certainty of objects). It may also set out the detailed powers and duties of the trustees (such as powers of investment, powers to vary the interests of the beneficiaries, and powers to appoint new trustees). 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.
Legislation underpinning Isle of Man Trusts includes: Trustee Act 1961, Variation of Trusts Act 1961, Perpetuities and Accumulations Act 1968, Recognition of Trusts Act 1988, Trusts Act 1995, Purpose Trusts Act 1996 and Trustee Act 2001.
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 conveyed (entrusted) ownership of his lands in his absence to another individual i.e. an “acquaintance”, often a relative or advisor to manage his estate (and pay and receive feudal dues etc.), on the understanding that the ownership would be conveyed back on his return. However, Crusaders often encountered a refusal to hand back the property upon their return.
Unfortunately for the Crusaders, English common law did not recognize their claim. As far as the King's 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. At this time, the principle of equity was born.
The Lord Chancellor would consider it "unconscionable" that the legal owner could go back on his word and deny the claims of the Crusader (the "true" owner). Therefore, he would find in favour 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 acquaintance the "trustee". The term "use of land" was coined and, in time, it developed into what we now know as a trust.