It is difficult to find a completely satisfactory definition of a trust, although the general idea is not too difficult to grasp. Generally, the Trustee is the nominal owner of the trust property, but the real or beneficial owner of the trust property is the "cestui que trust". Alternatively the trustee is the legal owner and the cestui que trust (beneficiary) is the equitable owner.
Neither definition covers the case of a sub-trust where a beneficiary of a trust him or herself declares themselves to be the trustee of their beneficial interest for their beneficiaries.
The definition put forward by Underhill 1 is as follows:-
"A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called trust property) either for the benefit of persons who are called beneficiaries or cestui que trust of whom he may himself be one, and any one of whom may enforce the obligation, or for a charitable purpose, which may be enforced at the instance of the Attorney General, or for some other purpose permitted by law though unenforceable."
Trusts being equitable obligations originated in the Court of Chancery although trusts are now enforceable in either branch of the English the High Court and are recognised by states with an Anglo-American common law legal system and by some civil law states such as those party to a convention for the recognition of trusts.
The Trustee must have some control over the trust property in order to be able to deal with it for the benefit of the cestui que trust, though the control may be nominal. 2 The trust property can comprise any proprietary interest which a person can, at law or in equity, transfer or assign.
It is not the case, however, that simply because legal title to certain property is in A and the whole beneficial interest is vested in B, that A necessarily holds as trustee.
A trust is a well established equitable arrangement which does not have to be recorded in any public register. Its terms accordingly remain confidential to third parties. The property transferred to and held in trust can include anything that is capable of being transferred such as shares, money, land or real estate.
1Underhill & Hayton, Law of Trusts and Trustees, 15th ed, p2. (See) 15 (1899) LQR 294 (WG Hart).
2 Statement cited with approval by French J in Harman v Federal Comr of Taxation (1989) 91 ALR 550 at 559; affd (1991) 104 ALR 117 (Aust HC)