Trust Elements – Trust Property – I

Trust Elements – Trust Property – I

A trust has five main elements. First, a settlor transfers some or all of his or her property. Second, the property transferred by the settlor is designated trust property. Third, the trust property designated by the settlor is transferred with the settlor’s intent that it be managed by another. Fourth, the trust property designated by the settlor is transferred for management by a trustee. Fifth, the trust property designated by the settlor is managed by a trustee for the benefit of a beneficiary. This article discusses some aspects of the element of trust property.

Words For Trust Property

Each trust must have some property for the trustee to manage at some time. The property that is held in trust (or to be held in trust) is known as trust property. There are many other words for trust property. Trust property may be known as the trust’s corpus (Latin for “body”). Trust property may be known as the trust’s res (“thing”). Trust property may be known as the subject matter of the trust.

The term “corpus” is sometimes used in a specific sense, namely, the property transferred by the settlor to the trust, the trust’s principal, as opposed to property earned by the trustee’s management of the property, known as the trust’s income. For example, the corpus of a trust may be an apartment building. The income from the trust is the profit from renting out the apartments in the apartment building.

The term “endowment” may be used to describe a the transfer of corpus or principal large enough to support the purpose of the trust through the income on the corpus or principal. For example, a college or school may have an endowment, meaning that the college or school receives some or all of its operating funds from the income on a substantial corpus or principal. An organization supported by income on a substantial corpus or principal is sometimes known as a foundation.

Transfer of the Trust Property

In order for a trust made during the settlor’s life to be valid, prior to the settlor’s death there must be a clear transfer of property to the trust. A settlor cannot retain too much control over a trust. If a settlor retains too much control over a trust, the trust may be deemed an invalid trust. A trust deemed invalid because the settlor has retained too much control is known as an illusory trust.

To determine if a settlor has retained too much control over a trust, several factors may be considered. A settlor may have retained too much control if he or she has named himself or herself as trustee. A settlor may have retained too much control if he or she has reserved income from the trust. A settlor may have retained too much control if he or she has retained the right to revoke the trust. A settlor may have retained too much control if he or she has exercised any retained rights solely for his or her own benefit.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.