Simple Trust Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Simple Trust, written in plain English, along with examples of how it is used.

What is Simple Trust?

(n) A simple trust is the trust which distribute or otherwise spend all its income during the specific period itself without accumulating or making surplus of income over expenditure.

History and Meaning of Simple Trust

A Simple Trust is a straightforward type of trust that distributes all of its income to beneficiaries, without accumulating any surplus or making capital gains. The trust can be set up for a fixed term or can continue indefinitely. It is also known as a non-discretionary trust because the trustee has no discretion over the distribution of the trust's income.

The concept of a Simple Trust dates back to English trust law, which developed in the 12th century. The original purpose of trusts was to keep land and other assets in a family, while allowing for efficient management and distribution of resources. Simple Trusts continue to be used today for various reasons, including tax planning purposes and providing for the needs of beneficiaries.

Examples of Simple Trust

  1. Tom set up a Simple Trust for his daughter Jane, with the requirement that all income generated by the trust should be paid out to Jane every year for the next 10 years. After the 10 years are up, the trust will be dissolved and any remaining assets will be distributed to Jane.

  2. Brian inherited his family's farming business through a Simple Trust set up by his grandfather decades ago. Under the terms of the trust, all income generated by the farm is distributed to Brian annually.

  3. A couple who owned several rental properties set up a Simple Trust for their children, which distributed all rental income to the children in equal shares every year.

Legal Terms Similar to Simple Trust

  1. Discretionary Trust - A type of trust where the trustee has discretion over how and when to distribute the trust's income and/or assets to beneficiaries.

  2. Bare Trust - A simple type of trust where the trustee holds assets on behalf of the beneficiaries but has no power to intervene in the trust's management or distribution of income.

  3. Constructive Trust - A trust that is not created by an express agreement or written document, but rather is imposed by a court order to remedy an injustice or prevent unjust enrichment.