A Private Express Trust is a powerful equitable obligation in writing to protect the interest of the beneficiaries with clear intention and purpose.
The Private Express Trust is a unique way of owning property under which assets are held by a trustee for the benefit of another person, or for certain purposes, in accordance with special equitable obligations.
A person who is solely and absolutely entitled to an asset is entitled to the exclusive and unrestricted right to possess, use and otherwise enjoy the asset for his own benefit (he is even at liberty to abuse and destroy it). Subject only to limitations imposed by statute as a matter of public policy and limitations imposed to take account of the rights of others to enjoy the assets they own absolutely.
When a settlor creates a trust, he is free to define the obligations of the trustees and the entitlement of the beneficiaries as he sees fit. Subject only to limitations imposed for reasons of public policy. If he desires that the trustees should be bound to care for part only of the trust fund, he may so provide.
Let’s say for example you have a book you want to gift to your grandchild. All you need to do is transfer possession of the book, in circumstances which indicate that an absolute gift is intended. Words such as ‘Happy Birthday, this book is for you’ words will suffice.
Transferring possession of an ordinary moveable asset is sufficient to transfer legal title and where an absolute gift is intended. The transfer of legal title also has the effect of conferring the exclusive right to the beneficial use and enjoyment of the asset on the transferee.
In contrast, transfer of legal title to a transferee to hold on trust for someone else has the quite different effect of constituting the transferee a trustee of the property for the designated beneficiary. A related distinction between an absolute gift and a trust is that it is possible to create a trust for the benefit of the beneficiaries who, because of some legal incapacity such as infancy or mental illness, cannot take an absolute interest in the asset in question.
Land, for example, cannot be held absolutely by any person under the age of 18, but it is possible to transfer land to a competent adult to hold on trust for an infant.
A trust asset does not have to be a tangible thing such as a plot of land or a book; it can be an intangible asset such as a debt, a trademark, or the right to the proceeds of an insurance policy. Of course, even in the case of a book or a plot of land, the true asset is not the thing itself, but the intangible right to benefit from the use and enjoyment of the thing. Usually, the trust property consists of a number of different assets that together make up a fund. Eventually, the trust fund must be distributed to the beneficiaries or the proceeds of the sale of the fund must be distributed, but in the meantime the fund must be managed and invested.
There is nothing in life more certain than death and taxes, and trusts can be used to plan for both. Ever since the days of its predecessor, the medieval ‘use’, the trust has been employed to separate beneficial enjoyment of an asset in order to escape taxes charged on benefits, and duties charged on formal ownership.
If an owner of a property wishes to settle it on trust to avoid tax, HM Revenue & Customs is very astute to spot and attempt by the settlor to reserve a beneficial interest for himself and any attempt to reserve control might also be construed as a taxable reservation of benefit. The distinct difference between tax avoidance and tax evasion is that tax evasion is criminal financial planning carried out to avoid tax payments, whereas tax avoidance is legitimate financial estate planning carried out to prevent tax falling due in the first place.
Courts frequently exercise their statutory power to approve schemes for the variation of beneficial interests under trusts even where the purpose of the schemes is the avoidance of tax. Its perfectly permissible to arrange one’s affairs so as to reduce one’s tax burden.