To say “everything is a trust” is incorrect.

There is a “teaching” going around that says everything is a trust. This is not a correct statement. What I have been saying is, “That every express trust is a contract, but every contract is not necessarily a trust.”

The statement that “everything is a trust” is incorrect, and the assertion that “every express trust is a contract, but every contract is not necessarily a trust” is legally accurate. Trusts and contracts are distinct legal concepts, though they may overlap in certain circumstances. An express trust can be created through contractual agreements, but not all contracts establish a trust relationship. This distinction is supported by case law and legal principles.

Distinctions Between Trusts and Contracts

Trusts and contracts differ fundamentally in their formation and nature. A trust is a fiduciary relationship concerning property, where the trustee holds legal title and is subject to equitable duties to manage the property for the benefit of the beneficiary. Trust formation does not require mutual assent or consideration, which are essential elements of a contract. For example, the Supreme Court of Virginia in Boyle v. Anderson emphasized that a trust is not a contract, noting that “the existence of the contract depends on actual acceptance of an offer. It is founded on mutual assent. A trust is in the nature of a conveyance of an equitable interest, and its formation is not dependent on the beneficiary’s knowledge or acquiescence” Boyle v. Anderson, 301 Va. 52 (2022). Similarly, the Appellate Court of Connecticut in Tunick v. Tunick highlighted that a trust does not rest on an exchange of promises, unlike a contract, and instead requires the transfer of a beneficial interest in property to a trustee Tunick v. Tunick, 201 Conn.App. 512 (2020).

Characteristics of Express Trusts

An express trust is created intentionally by the parties and typically involves a fiduciary relationship with respect to property. Courts have consistently held that an express trust arises from a manifestation of intent to create such a relationship, and no specific language or formalities are required. For instance, the United States Bankruptcy Court in In re Stanifer outlined the elements of an express trust, including sufficient words to create a trust, a definite subject, and an ascertainable object or res In re Stanifer, 236 B.R. 709 (1999). Similarly, the Court of Appeals of Washington in Westview Investments, Ltd. v. U.S. Bank Nat. Ass’n stated that an express trust exists when a person accepts possession of property with the understanding that it is to be held and applied for specified purposes, rather than as their own absolute property Westview Investments, Ltd. v. U.S. Bank Nat. Ass’n, 133 Wash.App. 835 (2006).

Overlap Between Trusts and Contracts

While trusts and contracts are distinct, an express trust can be created through a contractual agreement. For example, the Court of Appeals of Washington in Hartford Fire Ins. Co. v. Columbia State Bank noted that express trusts are “those trusts which are created by contract of the parties and intentionally” Hartford Fire Ins. Co. v. Columbia State Bank, 183 Wash.App. 599 (2014). However, not all contracts create a trust. The United States Bankruptcy Court in In re Marchiando clarified that a contractual relationship arising out of a loan transaction does not create the required express trust, emphasizing that an implied trust does not suffice In re Marchiando, 138 B.R. 548 (1992).

Practical Implications

The distinction between trusts and contracts has practical implications in legal disputes. Courts examine the intent of the parties, the language used, and the circumstances surrounding the transaction to determine whether a trust relationship exists. For example, in In re Brockway Pressed Metals, Inc., the court found that the language in a contract did not create an express trust, despite possessing characteristics of a spendthrift trust provision In re Brockway Pressed Metals, Inc., 363 B.R. 431 (2007). Similarly, in In re Underwood, the court held that ambiguous clauses in contracts are construed against the drafter, and the substance of the transaction governs the relationship rather than the label or form used In re Underwood, Not Reported in B.R. (2004).

Superseded Authority

It is important to note that Schoneberger v. Oelze, which distinguished trusts from contracts, has been superseded by statute as stated in Phoenix-Tucson Ranch, LLC v. Robert Charles Engelstad and Dolores Ann Engelstad Revocable Trust Schoneberger v. Oelze, 208 Ariz. 591 (2004). Therefore, reliance on this case should be approached with caution.

While every express trust may involve a contractual element, not every contract constitutes a trust. Trusts and contracts are distinct legal constructs, and their creation depends on the intent, language, and circumstances surrounding the transaction.

Express Trusts are still a contract. One of most important elements of any contract is the intent of the parties. The intent shows the type of contract it is, whether it is an express contract of another kind, or an express trust.

The intent of the parties is a critical factor in determining whether a contract constitutes an express trust. While every express trust is a contract, not every contract is a trust. Courts consistently emphasize that the creation of an express trust requires a clear manifestation of intent to establish a fiduciary relationship, rather than merely a contractual one. This intent can be demonstrated through explicit language, conduct, or circumstances surrounding the agreement. Additionally, certain formal elements, such as a trust res, ascertainable beneficiaries, and specific trust duties, must be present for an express trust to exist.

Intent As The Key Element In Determining An Express Trust

The intent to create a trust relationship rather than a contractual relationship is the key element in determining the existence of an express trust. Courts have held that sufficient words or conduct must unequivocally demonstrate the parties’ intention to create a trust. For example, the Ninth Circuit has stated that the general characteristics of an express trust include “sufficient words to create a trust; a definite subject; and a certain and ascertained object or res,” with the intent to create a trust relationship being paramount In re Thornton, 544 F.2d 1005 (1976). Similarly, the Court of Appeals of Ohio emphasized that the intent of the parties ultimately controls whether an express trust has been created, and no particular form of words is required to manifest such intent Eckell v. Borbidge, 114 B.R. 63 (1990).

Manifestation Of Intent Through Words And Conduct

The manifestation of intent can be derived from the language of the agreement, the parties’ conduct, and the circumstances surrounding the transaction. Courts have noted that ambiguous clauses in contracts are construed against the drafter, and the substance of the transaction governs the relationship rather than the label or form used In re Underwood, Not Reported in B.R. (2004). For instance, in In re Brockway Pressed Metals, Inc., the court found that the inclusion of certain language in a contract did not establish an express trust because the record lacked evidence of intent to create such a trust, and the agreement did not specify essential elements like a trustee, trust res, or trust duties In re Brockway Pressed Metals, Inc., 363 B.R. 431 (2007).

Essential Elements Of An Express Trust

In addition to intent, the creation of an express trust requires certain formal elements. These include a trust res (property subject to the trust), ascertainable beneficiaries, and specific trust duties. Courts have emphasized that these elements must be described with certainty; otherwise, no trust is created. For example, under Texas law, the settlor must identify the beneficiary, the res, and the trust purpose, and the settlor’s words must impose an obligation on the trustee Markel Insurance Company v. Origin Bancorp, Inc., 663 F.Supp.3d 670 (2023). Similarly, Illinois courts require clear and convincing evidence of the trust’s existence and terms, and any ambiguity in the necessary elements is fatal to the creation of a trust Estate of Wilkening, 109 Ill.App.3d 934 (1982).

Intent Versus Contractual Relationships

Courts have distinguished between trust relationships and contractual relationships, emphasizing that the intent to create a fiduciary relationship is what sets an express trust apart. For instance, in In re Thornton, the court noted that the intent to create a trust relationship rather than a contractual relationship is the key element in determining the existence of an express trust In re Thornton, 544 F.2d 1005 (1976). This principle was reiterated in In re Montes, where the court emphasized that the intent to create a trust relationship must be clear and distinct from a mere contractual obligation In re Montes, 177 B.R. 325 (1994).

Practical Application Of Intent In Case Law

Case law demonstrates that the intent of the parties is often evaluated in the context of the agreement’s language and the surrounding circumstances. For example, in Westview Investments, Ltd. v. U.S. Bank Nat. Ass’n, the court held that an express trust exists where a person accepts possession of property with the understanding that it is to be held and applied for specified purposes, rather than as their own absolute property Westview Investments, Ltd. v. U.S. Bank Nat. Ass’n, 133 Wash.App. 835 (2006). Similarly, in In re Emberton, the court emphasized that unequivocal and unambiguous language or conduct is required to establish an express trust, particularly when the document is drafted by an attorney In re Emberton, 501 B.R. 392 (2013).
In conclusion, the intent of the parties is the cornerstone of determining whether a contract constitutes an express trust. Courts analyze the language, conduct, and circumstances surrounding the agreement to ascertain this intent, while also requiring the presence of formal elements such as a trust res, beneficiaries, and trust duties. Without clear evidence of intent and these essential elements, a contract cannot be deemed an express trust.

A trust is still a contract and meets all the elements of a contract, but it is a distinct type of contract that is different than other types of contracts?

An express trust is a distinct type of contract that meets all the basic requirements of a contract while incorporating unique elements that differentiate it from other types of contracts. Below is an analysis of the elements that define an express trust and how it differs from other contractual arrangements.

Elements of an Express Trust

An express trust is characterized by specific elements that distinguish it from other contracts. These elements include:

1. Explicit Declaration and Intent to Create a Trust: The settlor must explicitly declare their intention to create a trust, which is often evidenced in writing In re Ackerman, 587 B.R. 750 (2018). This declaration reflects the positive action of the parties to establish the trust Sears v. First Federal Sav. & Loan Ass’n of Chicago, 1 Ill.App.3d 621 (1971).
2. Definite Subject Matter or Trust Res: The trust must have a clearly defined subject matter or property that is the focus of the trust relationship In re Ingram’s Estate, 212 Kan. 218 (1973), Pizel v. Pizel, 7 Kan.App.2d 388 (1982). This ensures that the trust has a tangible or identifiable asset to manage.
3. Acceptance and Handling of the Trust Property by the Trustee: The trustee must accept the property and manage it as a trust, rather than as their own absolute property In re Ingram’s Estate, 212 Kan. 218 (1973). This fiduciary role is central to the trust relationship.
4. Separation of Legal and Equitable Title: An express trust involves the separation of legal and equitable title, where the trustee holds the legal title and the beneficiary holds the equitable title Lobban v. Wierhauser, 141 S.W.2d 384 (1940).
5. Beneficiary: There must be a beneficiary who is entitled to the benefits of the trust property In re Raplee’s Will, 160 Misc. 615 (1936).

Consideration: Like other contracts, an express trust must be supported by valid consideration, which may include a prior interest in the property, payment of the purchase price, or a legal obligation to repay Lobban v. Wierhauser, 141 S.W.2d 384 (1940).

Differentiation from Other Contracts

While an express trust shares basic contractual elements such as mutual consent, consideration, and lawful purpose, it is distinct in several ways:

1. Fiduciary Relationship: Unlike ordinary contracts, an express trust establishes a fiduciary relationship where the trustee is obligated to act in the best interests of the beneficiary. Liability under an express trust arises from a breach of trust rather than a mere debt or obligation Carr v. Harrington, 107 Ark. 535 (1913).
2. Defined Trust Res: The requirement for a definite trust res sets express trusts apart from contracts that may not involve specific property or assets In re Stanifer, 236 B.R. 709 (1999).
3. Intent and Structure: The explicit intent to create a trust and the separation of legal and equitable title are unique to express trusts and are not typically found in other types of contracts Lobban v. Wierhauser, 141 S.W.2d 384 (1940).
4. Creation by Positive Action: Express trusts arise from the deliberate actions of the parties, often evidenced by written instruments or explicit terms, whereas implied trusts or other contracts may arise by operation of law or through less formal arrangements Sears v. First Federal Sav. & Loan Ass’n of Chicago, 1 Ill.App.3d 621 (1971).

These elements collectively define an express trust as a specialized form of contract that incorporates fiduciary duties and a structured relationship involving specific property, distinguishing it from other contractual arrangements.

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