Trusts: Overview

Introduction:

This note will discuss the meaning of trust and the common terminologies associated with it.  

Meaning and Nature of Trust:

A trust is an arrangement by which one party, known as the settlor, gives title to his property to another, known as the trustee, to hold for the benefit of another party, known as the beneficiary. To illustrate, a father owns a piece of land and has a five-year-old son. Fearing that he may die soon, he transfers legal title to the land to his brother to hold for the benefit of his son. Here, the father is the settlor, his brother is the trustee, and his son is the beneficiary. His transfer of the legal title to his brother is to ensure his brother has full control of the property. However, such control is to enable or facilitate the management of the land for the benefit of his son, the beneficiary.

In Black’s Law Dictionary, 9^th ed., a trust is defined as

The right, enforceable solely in equity, to the beneficial enjoyment of property to which another person holds the legal title;

a property interest held by one person (the trustee) at the request of another (the settlor) for the benefit of a third party (the beneficiary).

A more elaborate definition is given by Petitt in “Equity and the Law of Trusts” at p. 30 as follows:

A trust can be said to exist whenever equity imposes on a person (the trustee) an obligation to deal with property1 of which he is the owner, either for the benefit of other persons (the beneficiaries or cestuis que trust), any one of whom may enforce the obligation, or for a charitable purpose, which may be enforced at the instance of the Attorney-General, or for some other purpose permitted by law, although unenforceable.

In Green v Russell [1959] 2 QB 226, 241, a trust was defined as

An equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property) for the benefit of persons (who are called the beneficiaries or cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation.

In ‘Ghana Land Law and Conveyancing’ (2nd Edition) at pages 105-106, B.J. da Rocha and Lodoh described a trust as a concept in equity whereby one person (called “the trustee”) holds the nominal or legal title in property that has been made available to him by another person (called “the settlor”) for the benefit of some other person (called “the beneficiary”). This definition was cited with approval by the Supreme Court in Gateway Worship Center v. Soon Boon Seo [2009] GHASC 7 (21 January 2009). In that case, Soon Boon Seo promised the Gateway Worship Center that he would raise funds in Korea to support the activities of the church. When he went to Korea, a philanthropist called Yei Jae Im donated the money to him. However, upon his return to Ghana, he failed to give the money to the church. The court held that there was a trust. Here, the philanthropist was the settlor, Soon Boon Seo was the trustee, and the church was the beneficiary. The money was given by the settlor to the trustee for the benefit of the beneficiary.

Common Terminologies Associated with a Trust:

1. Settlor: This is the person who creates the trust by transferring property to another person (the trustee) to hold for the benefit of one or more persons (the beneficiaries).
2. Trustee: This is the person to whom legal title to the trust property is vested for the benefit of another person (beneficiary).
3. Beneficiary or Cestui Que Trust: This is the person for whom a trust is created or who enjoys the beneficial interest in the trust property.
4. Trust property: This is the property that is conveyed to the trustee to hold for the benefit of the beneficiary.
5. Trust instrument: This is a document creating a trust or vesting the trust property in the trustee for the benefit of a beneficiary.
6. Legal interest: This is the interest recognised at common law and held by the trustee, which confers control, management, and power of disposition over the trust property, but not beneficial enjoyment.
7. Beneficial interest: Per Black’s Law Dictionary, 9^th, this is “A right or expectancy in something (such as a trust or an estate), as opposed to legal title to that thing. - For example, a person with a beneficial interest in a trust receives income from the trust but does not hold legal title to the trust property.”