TSEM6213 | Legal background to trusts & estates: splitting interests to create a trust

An absolute interest has two elements

• the legal interest, and

• the beneficial interest.

The owner of an absolute interest can split the two elements.

They can

• retain the legal interest and create beneficial interests in the asset

• retain the beneficial interest in the asset and transfer the legal interest to a nominee

• transfer the legal interest to trustees and create a beneficial interest in the asset.

Any of these can create a trust. It might be a bare trust.

They can effect this in their lifetime and create a settlement inter-vivos (between the living). Or they can effect it after their death by including suitable provisions in their will.