Trusts–Not Trustees–Are Legal Owners


          The term “legal owner” is often used in the law to refer to a trustee: “one recognized by law as the owner of something; especially one who holds legal title to property for the benefit of another.” (See Black’s Law Dictionary, legal owner, trust ownership). This may make sense to an attorney reading legal dictionaries. But the definition is a classic tautology (a fault of style and circular logic). The definition essentially says that a legal owner is one who holds legal title: “a legal owner is a legal owner.”

          Putting aside faults in logic and style, to refer to a “trustee” as the “legal owner” is unfortunate in terms of plain common sense, because it gives a layperson the sense that a trustee owns something (even legally owns something) that he in fact does not own. Common sense and common sense use of language says that a trustee’s rights are more appropriately termed legal management rights or legal fiduciary rights—not legal ownership rights.

          A trustee is more like a member of a board of directors, not a shareholder with ownership rights—thus the term “legal owner” to refer to a trustee is problematic (from a common sense point of view). Again, trustees are directors, not owners. A trustee (like a director, or an agent in a power of attorney) has legal rights to manage (sell, purchase, convey) property, but only in compliance with trust provisions. A director in a corporation, or an agent in a power of attorney, does not legally own property. And neither does a trustee in a trust legally own property-from every common sense and most legal definitions of the terms own and ownership.

          Further, the very term “trustees” only has significance in relation to the trust. Without the trust, the trustee is just a 70% bag of water–another human being or an entity. Finally, the trustees can die, resign, or be removed, and the Full Owner (See Black’s) can be long-deceased, and the actual “legal owner” of the assets lives on. It is the Trust, created by law and embodied in a document, that should be referred to as the legal owner of Trust assets or property.

          Based on common sense, we define a client’s trust (not the trustees) as the legal owner of the client’s trust assets.

By Craig E. Hughes