The law of trusts developed in England and Wales during the Middle Ages under the jurisdiction of the King of England. Whereas the common law historically regarded property as an indivisible entity, the Lord Chancellor had the discretion to declare that the real owner in equity (i.e. in all fairness) was a person other than the title holder. Thereafter the legal and equitable rights in property were separable. Trust law emanates from the common law and remains an accepted and widely used legal construct within the American legal system. The Uniform Trust Act is now widely adopted and provides consistency state to state.
A Trust is a legal entity created by a transfer of property from a grantor (a/k/a settlor) to a trustee to hold for the benefit of designated beneficiaries. A Trust is often employed to transfer some, but not all, of the bundle of rights associated with property. When a Trust is formed the legal interest and beneficial [equitable] interest diverge: the legal interest [title] is conveyed to the Trustee, although they have no equitable rights as trustee, and the equitable [beneficial] interest(s) are conveyed to the beneficiaries. There can be two tiers of beneficiaries: income beneficiaries who have a present interest in the Trust property (income, use, or otherwise), and remaindermen who have a future interest in the residual value of the Trust assets (typically upon termination of the trust). These two types can be different entities or one in the same dependent on what is trying to be achieved by utilizing a trust model.
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Often Trusts are used to give property to another when the Grantor wants to retain control or impose some limits on the use or investment of the trust property. But Trusts can also be a flexible tool for dividing the present or future rights to property.
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