Trusts: Still Going Strong after All These Years
Trusts: Still Going Strong After All These Years
Trusts, one of the oldest forms of bank business, are alive and well. What started out as an instrument to protect and provide for a family after the death of a household's provider has evolved into a form of protection for employees and businesses as well.
One of the earliest known trust forms is the guardianship. In common law, the king was protector of those who were not competent to manage their own affairs. Today, state laws and court supervision eliminate many of the problems those early guardians caused and insure that the property of the ward is well managed for the sole benefit of the ward.
Wills are another ancient form of protection for the family, with some of the earliest known being Egyptian. For example, the will of UAH was written in about 1800 B.C. Like today, those wills were a legal declaration of a person's desires as to how securities and other property should be distributed after death. Other evidence of wills appears in Hebrew, Roman, and Greek literature. Up to the 8th century, wills were used to name an heir and insure the continuation of the family. Later, nobility and creative business people started using wills to name executors (someone who executes the terms of the will). In the 13th century, the idea of probating or proving a will's validity began.
Today, the probate section of state law requires that there be proof of the validity of any will. It also requires that the estate be in order with all taxes and claims paid before the beneficiaries receive any of the estate property. The beneficiaries must also receive all that is due them. Technically, probate is sometimes defined as the process required to transfer assets from a decedent's name to the names of his or her heirs and/or beneficiaries.
As with wills, the English gave us the forerunner of today's personal trusts, or trusts that are established by individuals. History reveals that men of wealth usually put the church in charge of property and family when they were away for extended periods of time. But, the church sometimes mismanaged or even took possession of a person's assets, leaving the family destitute. During the Crusades, warriors often conveyed land and other holdings to a friend for the use of the crusader's wife and children. In the 1500s, England declared that the person who benefitted from the land was the legal owner; thus, when a father or husband did not return, the family was still in possession of the family holdings. In some states such as Louisiana, California, and Arizona, French law influence also crept into legislation governing wills.
With this historical base, the concept of personal trusts has changed little through the centuries. It is still the responsibility of the trustee (the party responsible for preserving and managing the assets of the trust) to act in a fiduciary manner for the trust holder and any beneficiaries.
One definition of "fiduciary" is said to come from Roman law and describes "a person or institution acting in a situation of trust and confidence that requires the exercise of good faith and candor. One who is given rights and power to be used for the benefit of another person is called a fiduciary."
Fiduciary is defined and regulated by state laws, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Agency, state departments of banking, and other regulatory agencies that govern the fiduciary relationships that exist between a trust holder and the institution holding the trust. Some examples of fiduciary relationships are the associations that exist between guardian and ward, executor and heir, and trustee and beneficiary.
When choosing a fiduciary, consider using a professional or corporate fiduciary, such as a bank, as opposed to using an individual as a fiduciary. Laws are complicated and often require …
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Publication information: Article title: Trusts: Still Going Strong after All These Years. Contributors: Not available. Magazine title: Business Perspectives. Volume: 3. Issue: 4 Publication date: Summer 1990. Page number: 9+. © 1999 University of Memphis. COPYRIGHT 1990 Gale Group.