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> This is Part 1 of Quick Guide to Trusts...Go back to the introduction
Again, we are taking a systems perspective to trusts. A trust has three components: 1) a beneficiary or set of beneficiaries; 2) a trustee or group of trustees, who in theory are separate and independent from the beneficiary or beneficiaries; 3) and the contents of the trust. Notice that nowhere is the person who set up the trust mentioned. The only say that the person who sets up the trust has is in his or her will, if this is a so-called "testamentary" trust, or in the trust agreement or trust formation document. That is why your will and the trust formation document are so important. They are like a computer program that will run forever, by itself, with no feedback from its creator.
If you are reading this website, you are probably interested in learning about "private trusts". But a trust is a trust. From a systems perspective, there is no difference between the US government's Social Security trust fund, which holds (or was supposed to hold) all of the money that has been withheld from our wages and is now being kept (or was supposed to be kept) in trust for us for decades until we retire. There is no difference between that, and the trust that you ask to be set up as a contingency if you die before your children become adults. Nonprofits are essentially a "public trust". They are a trust set up with the beneficiaries meant to be all of society (we give special tax-free status to nonprofits because we believe that, as a group, nonprofits provide so much benefit to society that it would be unfair to hinder them; we get much more value from their unhampered actions than we could ever get through taxing their activities). Every nonprofit has a board of directors/trustees who run it. And, of course, a nonprofit has assets; it cannot be started without being funded at least a little bit. Foundations are trusts. And corporations are, from a systems perspective, very much trusts (with beneficiaries, trustees, and assets). Corporations are very interesting from a historical perspective; they were never meant to be as they are now. It was intended that the creators of public utilities should have some freedom from liability for any problems the energy-generating or water-providing utility company might inadvertently create – there were some famous, very unfortunate catastrophes early on in the formation of utility companies, most notably a hydroelectric dam breaking outside of LA which killed many people. So no one would invest in a new utility company if they thought they would be liable for this loss of life and damaged property. Unfortunately what we now know as a modern corporation was a bastard child of this utility company legislation. It is as if there are no laws, no ethics, and no rudder governing the corporation.