trust, in law, arrangement whereby property legally owned by one person is administered for the benefit of another. Three parties are ordinarily needed for the relation to arise: the settlor, who bequeaths or deeds the property for another's benefit; the trustee, in whose hands the control of the property is vested and who receives a fee fixed by law; and the beneficiary, for whose use the proceeds of the property are to be applied. In some cases the settlor may be the trustee or beneficiary, but it is indispensable that the trustee (legal owner) and the beneficiary (equitable owner) be different persons. The trustee's duty is to make the capital or earnings available to the beneficiary in the manner prescribed by the settlor and to manage the property prudently and honestly. The beneficiary may bring suit if this duty is breached. In modern times banks and trust companies, with their special facilities for handling investments, are often named the trustees of substantial properties.

Business Applications of Trusts

The arrangement at which the Sherman Antitrust Act was directed was a business application of the trust form. The Standard Oil Company, for example, induced stockholders in various enterprises to assign their stock to a board of trustees and to receive dividend-bearing trust certificates in return. The board was thus able to manage simultaneously enterprises that many believed should have been in active competition. Soon most business combinations in restraint of trade came to be called trusts, whether in the legal form of a trust or otherwise.

A horizontal trust is a combination of corporations engaged in the same line of business. A vertical trust is an organization that controls all or part of a series of operations extending from the procuring of the raw materials to the retailing of the finished products. In Europe the term cartel is applied to a monopoly or trust, but the term is broader in that it may have international scope, and there, as in the United States, it may be either vertical or horizontal.

Business trusts have been opposed as monopolies, and laws have been enacted to prohibit or control them. They have been defended as reducing costs through large-scale operations and avoiding the expenses of competition. In the United States trusts grew rapidly from 1880, and by 1905 most of the important mergers in American industry had been formed. The Sherman Antitrust Act, passed by Congress in 1890, made illegal all "agreements in restraint of trade" and all "attempts to monopolize" industry; but the law was not vigorously enforced. The Clayton Antitrust Act (1914) was designed to stop various practices of "unfair" competition, and the Federal Trade Commission was given power to issue "cease and desist" orders when violations were found.

National Trust, British association to preserve for the nation places of natural beauty or buildings of architectural or historic interest in the British Isles; founded 1894, chartered 1895. By act of Parliament (1907) the Trust was empowered to acquire land inalienably and to be exempt from duties on property given or willed. In 1934 the Trust received special powers to protect by covenant privately owned property. The owner retains such property and its income, but may neither build on it nor alter its use without permission.

Brain Trust, the group of close advisers to Franklin Delano Roosevelt when he was governor of New York state and during his first years as President. The name was applied to them because the members of the group were drawn from academic life. This informal advisory group on the New Deal included Columbia Univ. professors Raymond Moley, Adolf A. Berle, Jr., and Rexford G. Tugwell and expanded to include many more academicians. It soon disintegrated, but the term has remained in common usage for similar groups.

or unit trust or open-end trust

Company that invests the funds of its subscribers in diversified securities and issues units representing shares in those holdings. It differs from an investment trust, which issues shares in the company itself. While investment trusts have a fixed capitalization and a limited number of shares for sale, mutual funds make a continuous offering of new shares at net asset value (plus a sales charge) and redeem their shares on demand at net asset value, determined daily by the market value of the securities they hold.

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Company, often a commercial bank, acting as trustee for individuals and businesses and providing related financial or estate-planning services. Trust services for individuals commonly include the administration of estates, living trusts (trusts that become effective during the lifetimes of their makers, or settlors), and testamentary trusts (trusts originating in a will). Services for businesses include the administration of corporate bond indentures and corporate pension funds. Trust companies may also serve as corporate stock registrars and as paying agents for the distribution of dividends.

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In law, a relationship between parties in which one, the trustee or fiduciary, has the power to manage property, and the other, the beneficiary, has the privilege of receiving the benefits from that property. Trusts are used in a variety of contexts, most notably in family settlements and in charitable gifts. The traditional requirements of a trust are a named beneficiary and trustee, an identified property (constituting the principal of the trust), and delivery of the property to the trustee with the intent to create a trust. Trusts are often created for the sake of advantageous tax treatment (including exemption). A charitable trust, unlike most trusts, does not require definite beneficiaries and may exist in perpetuity. Seealso trust company.

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or closed-end trust

Financial organization that pools the funds of its shareholders and invests them in a diversified portfolio of securities. It differs from a mutual fund, which issues units representing diversified holdings rather than shares in the company itself. Investment trusts have a fixed number of shares for sale; their price depends on the market value of the underlying securities and on the demand for and supply of shares. The first modern investment trusts were formed in England and Scotland as early as 1860. Many early U.S. investment trusts failed with the collapse of the stock market in 1929, but others have since prospered under stricter federal regulation.

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Group of advisers to Franklin Roosevelt in his 1932 presidential campaign. Its principal members were the Columbia University professors Raymond Moley, Rexford Tugwell, and Adolf A. Berle, Jr. (1895–1971). They presented Roosevelt with analyses of national social and economic problems and helped him devise public-policy solutions. The group did not meet after Roosevelt became president, but members served in government posts. Seealso New Deal.

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