Post by Sapphire Capital on Apr 22, 2009 10:22:25 GMT 4
Trust Law and the Title-Split: A Beneficial Perspective
Kent D. Schenkel
New England School of Law
January 22, 2009
Abstract:
Recent functional analyses of the trust tend to emphasize its effect on the parties to the trust deal and give less attention to the nature of the beneficiary's interest, especially in relation to persons outside the trust transaction. In contrast, this article takes a critical approach to the trust from the primary perspective of the benefits it provides to beneficiaries. From this perspective, it finds that while the trust maintains the flexibility of a contract it also restricts legal interests of third parties who are strangers to the trust bargain; a feat that contracts are unable to accomplish. These consequences emerge because of the fiction of the trust form, which is that it splits title into legal and equitable parts. The title-split fiction has proved useful when put to beneficial ends, but at times it allows trust beneficiaries to escape certain important responsibilities of property ownership, causing economic and other distortions. In some cases courts acknowledge that evasion of ownership burdens by trust beneficiaries should be trumped by policy arguments in favor of third-party claimants to trust property; in others such arguments are ignored, and a deductive analysis of the title-split prevails without meaningful inquiry. Historically, trusts were used by the relative few and problems caused by the title-split fiction were sporadic. With trusts becoming more widely-used, a more measured approach to the analysis of a beneficiary's interest is warranted.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1340010_code858752.pdf?abstractid=1331597&mirid=1
Kent D. Schenkel
New England School of Law
January 22, 2009
Abstract:
Recent functional analyses of the trust tend to emphasize its effect on the parties to the trust deal and give less attention to the nature of the beneficiary's interest, especially in relation to persons outside the trust transaction. In contrast, this article takes a critical approach to the trust from the primary perspective of the benefits it provides to beneficiaries. From this perspective, it finds that while the trust maintains the flexibility of a contract it also restricts legal interests of third parties who are strangers to the trust bargain; a feat that contracts are unable to accomplish. These consequences emerge because of the fiction of the trust form, which is that it splits title into legal and equitable parts. The title-split fiction has proved useful when put to beneficial ends, but at times it allows trust beneficiaries to escape certain important responsibilities of property ownership, causing economic and other distortions. In some cases courts acknowledge that evasion of ownership burdens by trust beneficiaries should be trumped by policy arguments in favor of third-party claimants to trust property; in others such arguments are ignored, and a deductive analysis of the title-split prevails without meaningful inquiry. Historically, trusts were used by the relative few and problems caused by the title-split fiction were sporadic. With trusts becoming more widely-used, a more measured approach to the analysis of a beneficiary's interest is warranted.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1340010_code858752.pdf?abstractid=1331597&mirid=1