What is a trust? Essentially, a trust is the concept in which someone gives something to someone for the benefit of another.

To help those who are unfamiliar with trusts or how they work, we're going to use the U.S. postal system as an example:

One day, you sit down and write a letter. When you mail the letter, you created a trust. As the writer of the letter, you are the creator or, as it's more commonly called, the Grantor of the trust. When your mailman picks up your letter, he becomes the trustee, while the letter's recipient is the beneficiary. The trustee is subjected to the rules of the trust. These rules are found on the letter itself, and include the address to deliver where the letter is to be delivered, and a return address should the mailman be unable to complete the terms of the trust, which are to deliver the letter to the first addressee.

There are further terms and rules the mailman is already bound to obey when he takes on the trusteeship of delivering the letter. In fact, the mailman not really the trustee but the trustee's agent because he is subject to the rules and judgment of his employer who, ultimately, is the trustee.

Should anyone attempt to interfere with the letter's delivery, both the mailman and the U.S. Postal Service are obligated to protect the letter as if it were their own property.

The mailman is in possession of the letter. He will hold and guard it, and deliver it. However, not at any time is the mailman entitled to the use of it. As a trustee, your mailman will not return the letter, even to you, unless he is unable to deliver the letter to the addressee. In other words, the mailman holds a right to the letter, but never to the use of it as a part of his personal or real property. He simply has a legal right to hold that letter in his possession and guard it against anyone who attempts to take it.

The addressee of the letter is the beneficiary of the trust. The beneficiary may choose to either have the letter delivered into someone else's care, or to appoint someone to receive it on his behalf.

If the letter is undeliverable, then the trust must be dissolved. The dissolution of the trust is accomplished simply by returning the letter. It may go back to the original sender (i.e., the grantor) but only his name is on the return address label, which is a part of the original terms of the trust. If some else's return address is on the letter, then that person will receive it, not the original grantor.

An important characteristic of a trust is splitting the lawful title into two parts: legal title and equitable title. After he mailed the letter, the Grantor no longer had either; the Post Office did. The mailman (or his supervisor) holds what could be considered a legal title to the letter. The mailman has no right to the beneficial use of the letter (i.e., he cannot read it) but he has all the responsibility of caring for it and delivering its value intact to the Beneficiary. The Beneficiary holds the equitable title and it is the Beneficiary that the law considers to be the true owner of the property.

In summary, a conversion took place the moment the letter was dropped into the mailbox's slot. Until the letter actually passed into the possession of the U.S. Postal Service, there was no trust despite what it said on the envelope or even with the inclusion of the stamp. The Trustee signified his acceptance of the trust at the point when he placed his stamp on the letter, in which he then accepted and sealed his obligation to fulfill the terms of the trust.

We participate in other kinds of trusts on a daily basis. For example, when people purchase a home, they know how important it is in getting a clear legal title. But a legal title does not include the beneficial interest and are the antitheses of an equitable title, which the law considers to be the true owner of the property.

It should be remembered that a legal title is lawful, but a legal title is not a lawful title in the sense that it is not complete and actual title to the beneficial interest.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.