Introduction to settled property: What is a trust?
The law of trusts is based upon the concept of English law that property rights can be split into:
- the legal ownership, and
- the beneficial interest.
A person who is the absolute owner of property has both the legal and beneficial interest in it.
This means that the owner will show up as legal owner, for example, on a land register or on a company register, and will also enjoy any benefit produced by the property.
The absolute owner may split the legal interest from the beneficial enjoyment. This can be done by giving the legal ownership to trustees and the beneficial interest to a named beneficiary (or beneficiaries). Alternatively the owner can keep the legal title and make themselves a trustee.
Not all property held by trustees for the benefit of other people is settled property. Examples of this are:
- joint property
- a bare trust.
Scots Law has always had a unified system of law and equity and so never adopted the theory of legal and beneficial estates, with the result that Scots Law never recognised that the beneficiary could have real rights in trust property. This is probably the single most important difference between Scots Law and English Law in relation to trusts.