Understanding The Background to Trusts

Understanding The Background to Trusts

Understanding The Background to Trusts

The concept of a trust dates back to the Crusades and beyond. An agreement to have someone else manage a property or estate was a common practice among landowners worldwide. Historical evidence shows that early forms of trust laws existed in Islamic communities and in Rome as early as the 7th century.

In the medieval Middle East, the concept of a trust was called a waqf. There were four parties essential to the establishment of the waqf - a grantor (waqif), a trustee (mutawillis), a beneficiary, and a judge (qadi). The grantor initiates the trust with a trustee and the judge must approve of it for it to be valid. Trusts operate in the same way in the United States. Just like a modern day trust, the waqf ensured that the trustee would manage an estate and later turn it over to listed beneficiaries despite not having trust documents to establish the trust. These trusts were created through a verbal agreement. 

In Rome, a trust was known as the fidei commissa. A fidei commissa was created to make provisions for the transfer of property to lower the costs of owning that property. By having someone else manage the property through this early form of trusts, both the original owner and the trustee entered a financially beneficial relationship though without formal trust documents.

There was an even earlier form of trusts created through what is known as the Primogeniture system. This system appointed the first born male child as the heir to all properties and assets of the his parents. This heir is both trustee and beneficiary.

During the Crusades, trust law in England was created through the feudal system and by Crusaders seeing the benefits of the waqf in Islamic societies. When a knight that owned land left for battle, he would often ask a family member or friend to look after that land until his return. But as no official legal precedents or trust documents were established for the return of assets in trusts, the trustee could refuse to return the property. Since the Crusader gave the property to the trustee to manage, courts would rule in favor of the trustee. However, the original owner could appeal this matter through the chancellor of that region under the feudal system. The chancellor, acting as judge, could order the return of property if he saw fit. The trustee could also return the property listing the original as a trustee or by making the original owner a beneficiary of the estate.

As English law evolved and was disseminated to the colonies, common law made trusts legally available for more regions. Many jurisdictions in the United States continue to recognize English common law as the standard for making decisions regarding the ownership and management of trusts. Although this is the case for some states, the federal government has drafted legislation that creates a rubric for states to create their own trust laws and regulations and how trust documents are to be created. The most recent form of this type of federal legislation is known as the Uniform Trust code which was last amended in 2005.




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