Property Law: Trusts Explained

A house with blue paint on a street as part of a property trust

    In Brief:

  • Property trusts play a key role in property law in the U.S.

  • Trust law involves the transfer of property amongst several parties.

  • Learn more about property trusts and trust law below!

Property law extends beyond just the simple transfer of property from one party to another. Property trusts can make real estate and asset transfers between parties more complex, raising several questions about how trusts can be passed on seamlessly and without any legal complications. 

Why just what is a property trust? What is their purpose? How a closer look at how property trust law works! 

What is a Trust?

A trust is a three-way relationship in which one party, the trustor, gives another party known as the trustee the legal right to hold the title to a property for a third party, the beneficiary.

What is the Main Purpose of a Trust?

Property trusts are created mainly to provide legal protection for a trustor’s property and to make sure it’s distributed per their wishes.

In addition, property trusts have other advantages such as:

  • saving time when transferring properties between parties
  • minimizing paperwork
  • ensuring the proper legal transfer of assets in situations where they could be up for debate
  • protecting privacy
  • reducing taxes in some cases

How Property Trust Law Works

When a property owner places their property in a trust, they turn over some or all of their rights to the trustee, separating the property’s legal control and ownership from the trustor. Doing this controls the property if the trustor is absent, dies, or is incapacitated in some way. Trusts are often created in wills to ensure that children and other beneficiaries receive the trustor’s property without any legal complications. 

The trustee, in return, is given the legal title to a property, but has a legal obligation to act in the best interest of the beneficiary party, as the benefits of the trust belong to them. Trustees must then turn over the property and its benefits to the beneficiary, and those who fail to do so are subject to legal action in court. 

Trustees are usually either individuals, companies, or public bodies. The trust itself is controlled under the terms created for it, usually in the form of an official contract or deed. 

Testamentary trusts are trusts which transfer property in the event of the trustor’s death, while living trusts are created during a person’s lifetime to manage the transfer of property to the eventual beneficiary.