It has been said that trusts are the most flexible and useful estate planning instrument of all time. One also hears that trusts are is a legal innovation that is peculiar to the common law legal system and unknown in civil law countries such as France, Germany, and Italy, etc. This is at least an oversimplification, and the interested reader is referred to the law review Trust Funds In Common Law And Civil Law Systems.
Regardless, the trust as we know it, with purposes that are as unlimited as the imagination of the lawyers who draft them, had its origin in England at about the time of the Crusades. The feudal system had by then already created a sophisticated ownership concept consisting of a bundle of rights. The rights, entitlements and interests were accompanied by certain obligations to the king in return. To protect their interests, the landholders (typically nobles) had to bring an action in person at the King’s court of law. This in person availability was seriously undermined by lengthy absences of many knights during the crusades. According to one theory is this resulted in a new legal instrument, the “use” instrument, a precursor of the trust: Before leaving to the Holy Land, knights would transfer their property rights to another to the use of this other knight and his family until his return or to a designated son upon the knight’s death.
An alternative origin story has it that the “use” was established with the immigration of Franciscan friars in the thirteenth century. While the friars were unable to own property under an oath of poverty, benefactors could transfer property to suitable persons for the use of the friars to live and work on, essentially bypassing religious restrictions while retaining ownership of the property.
Indeed, to this day the defining characteristic of a trust is the relationship between a grantor (the trust maker), the trustee and the beneficiary.
The English uses of old were used for several different purposes: Surprisingly, until the Statute of Wills of 1540, interests in land could not be devised by will, but a use could accomplish this. Feudal burdens could be avoided under a technicality (no ‘seisin’). The grantor’s wife could be provided for, and land could be conveyed to religious bodies.
Just like our present-day IRS watches trust arrangements very carefully, so did the King’s tax collectors. One of the nefarious uses of the use was to defraud creditors and evade taxes, this and other ‘abuses’ resulted in the enactment of the “Statute of Uses” in 1536, which was a compromise of what the King wanted, and the landowners (as represented in Parliament) were willing to give up.
“The more things change, the more they stay the same.” Jean-Baptiste Alphonse Karr 1849.
