The Art of Creating the Modern Statutory Business Trust

In its simplest form, a common law trust is a contract under which one legal person, the beneficiary, transfers its assets to another legal person, the trustee. The condition precedent to the transfer is that the trustee manages these assets for the benefit of the beneficiary using the powers and authorities which the settlor grants to the trustee in the contract. The common law trust is composed of five broad categories: donative trusts, charitable trusts, commercial trusts, the Uniform Trust Code trusts and, special purpose trusts. The statutory business trust is a special
species of the common law trust.

 

Every common law trust has the same constituents. It is these constituents who are parties to the trust contract or who agree to be bound by the trust contract.

The settlor, also referred to as the grantor, is the person or entity who or which creates the trust. The settlor assigns to the trust the principal assets which is cash or property. The principal assets are managed for the benefit of the beneficiary. The settlor can be the same person or entity as the beneficiary or trustee.

The beneficiary, also referred to as the beneficial owner, is the individual or entity who or which receives the income and other benefits which derive from the principal assets in the from of return on investments or proceeds from the sale of property which is part of the principal. The terms and conditions by which the principal is administered or managed are set forth in a contract between the Beneficiary and the Trustee in a legal document called the trust instrument.

The protector is the individual or entity who or which the settlor or the beneficiary appoints to supervise or advise the trustee. Whether or not to appoint a protector is a matter for the settlor or the beneficiary to decide. Neither tradition nor statute requires that the settlor or beneficiary appoint a protector.