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A HISTORY OF TRUSTS AND THEIR COMMON USES
- Contributed by MontereyTrust.com

History of Trusts: We can trace trust history as far back as Norman Conquest of England in 1066. Prior to the Norman Conquest, English law was different, but with the Norman Conquest William decreed that he, as King, owned all the land. From time to time he gave control to others to administer his lands – that ownership was known as tenure – this is where our common term, tenant, originated.

Tenures were granted in exchange for a variety of goods or services such as knight services, farming services or maintenance of hunting grounds. A tenured resident could pass on his interest to an eldest son, but the King was entitled to an estate tax – the birth of our estate tax system.

The Magna Carta, which was adopted by England in 1215, further laid the foundation for Trust Law as we know it today. Under the Magna Carta an earl, baron, other person who was holding land, still had the right to pass his land directly to an heir. Again, it provided for an estate tax upon inheritance. If an heir was under age at the time his father died, a guardian of the land of an heir was appointed until “he became of age”.

The guardian was charged with the guardianship of such land and he was to maintain the houses, parks, fish preserves, ponds, mills, and everything else pertaining to it… and when the heir became of age, the land was restored back to him.

In trust law today, trustees are held to the “Prudent Person Rules” (See Trustee Duties in this Sidebar) in managing estates for others. The Magna Carta stated that the land shall be entrusted to prudent men who shall be answerable to the King for revenues and other guardianship issues of such land.

As an aside, the word “he” was used above because women were not allowed to hold title to land. In fact, the Magna Carta provides that “At her husband’s death, a widow may have her marriage portion [dowry] …returned to her”.. And “She may remain in her husband’s house for forty days after his death…”

Most of our current trust laws came over on the Mayflower from England – although far-reaching changes have been made since their adoption in the U.S. Prior to the 1970’s trusts were used mostly by wealthy families to move assets from one generation to another in an orderly manner and to take advantage of tax benefits. Trusts were also used to keep money out of the hands of a child that perhaps fancied fast racehorses and even faster women and would certainly have spent an entire inheritance in a very short time (See Spendthrift Protection in this Sidebar). A parent could set up a trust to benefit that spendthrift child, helping with educational expenses, funds needed to establish a business or buy a home, all the while keeping most of the funds away from the racetrack.

Paul Getty was once quoted as saying “I want to leave my children enough money so that they can do anything, but not so much that they do nothing”


Trusts and Their Common Uses: Generally speaking, there are three parties involved in a Trust agreement:

   -A Grantor or Trustor is the person who establishes the trust

   -The Trustee is the person appointed to administer the trust upon the Grantor’s incapacity or death

   -The beneficiary is the person(s) who receives the benefits of the trust

There are many types of trusts and trusts can be used to accomplish different objectives. Trusts are written documents, or Agreements, which are normally prepared by individuals during their lifetimes wherein they write an agreement which outlines what the individual (grantor) wants done with their assets upon their incapacity or death. The trust is usually part of the grantor’s overall estate plan and, subject to an individual’s personal situation, a complete estate plan could contain a Will, Trust Agreement, Power of Attorney for Finances, and Power of Attorney for Health Care (Advance Health Care Directive).

You may hear of Trusts being called living trusts or inter vivos trusts, marital trusts, by-pass trusts, charitable trusts, dynasty trusts, testamentary trusts.

Overall, Trusts are an important part of an estate plan and, if you have an estate of even $300,000, they should be considered. Trusts can protect a person from the need for a Court initiated Conservatorship, they can protect assets from being wasted in the capricious actions of an irresponsible child and they keep your estate out of Probate.
SIDEBAR

TRUSTEES & TRUSTEE DUTIES

PLANNED GIVING & CHARITABLE BEQUESTS

ESTATE PLANNING FOR PETS

YOUR ESTATE PLAN

CRITICAL CHOICES FOR HEALTH CARE

FAMILY OFFICE

AGENCIES: WHO DOES WHAT



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