Understanding Trusts: Equity, Property, and Protection

What Is a Trust?

A trust is defined as a right enforceable solely in equity. Unlike ordinary contracts or statutory arrangements, a trust exists in a separate jurisdiction of law known as equity. Equity was created historically to repair the shortcomings of common law. Where the common law was rigid and often incomplete—focused mainly on preventing harm, protecting property, and enforcing contracts—equity brought in fairness, flexibility, and remedies that the common law could not provide.

In the United States, only a few states still maintain separate equity courts, also known as chancery courts. These include Delaware, New Jersey, Mississippi, and Tennessee. This explains why so many banks and corporations incorporate in Delaware: its Court of Chancery remains a strong equity jurisdiction with favorable laws for corporations and trusts.

Equity vs. Common Law

At its heart, equity focuses on fairness. While common law courts decide cases strictly by precedent and statute, equity courts intervene when fairness requires a different solution. For example, in cases involving unclear contracts or property disputes, equity provides remedies to ensure just outcomes.

This principle is critical when dealing with trusts. A trust creates its own jurisdiction: when you establish a trust, you form a legal relationship recognized in equity. While states often attempt to assert control over trusts, courts themselves acknowledge limits. In practice, judges have dismissed cases against trust property on the grounds that they fall outside statutory jurisdiction.

Trusts as a Shield

Trusts can be remarkably effective for protecting property. For example, even traffic tickets or civil penalties can be placed into a trust, making them trust property. Once this happens, a lawsuit may be filed in federal court, and a lis pendens (a notice of pending litigation) can be placed on the matter. This prevents the state from collecting until the federal case is resolved. In many cases, lower courts simply drop the matter rather than risk conflict with federal jurisdiction.

This demonstrates a larger point: a trust is its own legal jurisdiction. Once property or claims are placed in trust, they are subject to equity law rather than ordinary statutory control.

How a Trust Works

A trust involves three essential roles:

• Grantor (or Settlor): The person who creates the trust and transfers property into it.

• Trustee: The person who holds legal title and manages the property according to the trust’s terms.

• Beneficiary: The person or people who enjoy the benefits of the property held in the trust.

Here’s a simple example: Imagine you have a bottle of water. You give it to a trustee—say, your friend Bree—with instructions that your children, the beneficiaries, will receive it when they need it. You can still take a sip if necessary, but Bree’s duty is to ensure your children ultimately receive the water.

This arrangement creates a binding relationship of duties and responsibilities. The trustee holds the legal title, but the beneficiaries hold the equitable right to benefit from the property.

Trusts in Practice: Homes and Probate

Many people use trusts to avoid probate and to ensure their families can access property without legal battles. For instance, a person who owns a home may place it into a trust with instructions that it pass to their children. When that person dies, the successor trustee immediately controls the property for the beneficiaries, without the delays, costs, and publicity of probate court.

This is one of the most common and practical uses of trusts today.

Trusts in Practice: Firearms

Trusts are also used for protecting more sensitive property, such as firearms. For example, a man once placed his legally purchased guns into an irrevocable trust. He made a lifelong friend the trustee and did not list beneficiaries in the paperwork. When a judge demanded that the man turn over his firearms, the man was able to truthfully respond: “Those guns are not mine anymore.”

When the judge learned that the firearms were held in an irrevocable trust, he recognized the court had no authority over them. The guns remained in the man’s home, stored safely by arrangement with the trustee, and the court dropped the demand.

The key principle is this: in a revocable trust, the grantor retains some control—like still holding the bottle of water in their hand. In an irrevocable trust, ownership is fully given away—like mailing the bottle to the trustee. Because the grantor no longer controls the property, courts have little to no authority to interfere.

Revocable vs. Irrevocable Trusts

The distinction between revocable and irrevocable trusts is essential:

• Revocable Trust: The grantor keeps control and can change or dissolve the trust. This is useful for property that might be sold or exchanged during one’s lifetime, such as a personal residence or farm.

• Irrevocable Trust: Once created, the grantor gives up full control. The trust cannot easily be altered, making it ideal for long-term protection and inheritance planning. Courts generally cannot interfere with irrevocable trusts if properly drafted.

A wise approach is to first experiment with revocable trusts—learning how they function, modifying them as needed—before establishing an irrevocable trust for permanent protection.