History of Trusts
It is believed that the trust concept first appeared around the time of the Middle Ages. Knights travelling overseas for lengthy periods would be concerned about protecting their estates so would transfer the legal ownership to a third party, such as a close friend. An agreement would be signed in which it was understood that ownership would be transferred back to the knight upon his return. This transfer of legal title empowered the transferee to manage the estate and enforce the rights of the estate against all parties while the knight was away.
On their return, most knights would reclaim ownership of their estates without any problems. However, on occasions, the person who had managed the estate as the "trustee" would refuse to relinquish ownership, despite the signed agreement in place. This agreement was not deemed to be legally binding under English common law, so the Court would invariably side with the person with legal title over the estate, in this case the ”trustee” and not the outright owner, the knight.
As rules of Equity developed in parallel with the English common law in response to the increasing number of disputes over ownership, it was accepted that a beneficial interest in property could exist alongside a separate legal interest. The common law rules provided for clarity and certainty of result whereas the rules of Equity applied principles of justice and fairness. Thus, the Court of Chancery began to make a distinction between the legal and equitable ownership of an asset. It was possible for one person to legally own and manage an estate in the best interests of other persons, without that owner actually deriving any benefit from it. This separation of legal and beneficial interest is the underlying concept upon which a trust is based.
Staff in our Trust team can explain in detail the benefits to you and your benficiaries of forming a Trust on the Isle of Man:
