What is Trust?

TRUST is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers ("settles") a property (often but not necessarily a sum of money) upon the second party (the trustee) for the benefit of the third party, the beneficiary.[1] Therefor, after the trustor transfers a property to the trustee, the trustee follows the contract to benefit the beneficiary in a safe and efficient way until the end of contract term or accomplish the purpose.

Structure of trust

When trustor wants to take care of himself/herself, others (ex: parents and children) or do charity, he/she can sign a contract with trust company. Then, transfer the property to trustee (trust company), the trustee will follow the trust instrument to take care the beneficiary until the end of contract.

The people concerned in trust

Trustor, trustee and beneficiary:

1. Trustor

“Trustor” is the person who provide property or funds to establish trust and terms. When a natural person or a juridical person wants to make financial plan for himself/herself or others(beneficiary) for some purpose (ex: reducing trade risk, taking care of family, doing charity etc.) he/she transfers property to trustee for management, then he/she become a trustor.

  • When a constructor sells pre-sell house, he sets up a real estate values trust to guarantee to buyers, the constructor is trustor.
  • When a landlord cooperates with a constructor to build a building, he transfers the land to trust, the landlord is trustor.
  • When a father transfers property to trust for taking care of children, the father is trustor.

2. Trustee

“Trustee” is an institution which has been authorized to manage trustor’s property according to the contract or law for benefiting the beneficiary. The trustee follows the contract to manage property and helps trustor to do financial management for benefiting the beneficiary until the end of contract term or accomplish the purpose.
The trustee must be a legal trust company which has license issued by SCEE.

3. Beneficiary

“Beneficiary” is the person who is benefited from trust, it can be trustor himself/herself or any others. Ex:

  • When a father transfers property to trust for taking care of children, the children are the beneficiaries.
  • When the trust is established base on purpose of doing charity, the people (no restriction on the number of people) whom are benefited are beneficiaries.

Furthermore, according to Cambodia’s trust law, there may has other participators take part in the trust. Ex: funder, entrusted substitute etc.

What is trust property?

“Trust property” is the property which is transferred to trustee to manage for benefiting the beneficiary according to the contract or law by trustor. The common properties include: money, money obligation, security, real estate etc.
In addition, trustee’s property ownership which is obtained by trust management, sale, losing, damage or any other reasons is still part of trust property.

What is trust purpose?

“trust purpose” is the reason why trustor establish trust, in other words, it is the purpose that trustor wants to accomplish by trust. Trust purpose looks simply but important, it is not only the basis of trust, but also the criterion to judge whether trustee achieve the goal. There are many reasons why trustor wants to do trust. Ex: appreciating in properties, safeguard properties, taking care of families, doing charity to support people in needs etc.
Trustee manages trust property on his/her personal behalf base on two premises: firstly, management must follow and no against trustor’s wishes. Trustor’s wishes on contract are the basis of how trustee manages trust. Secondly, the purpose of trust property management must be benefiting beneficiary or specific purpose. It is prohibited to benefit trustor himself/herself or any third person. Trustee manages property according to trustor’s wish to maximize beneficiary’s benefit or accomplish other specific purpose is the basis and the value of trust. Therefore, trust purpose is one of the most important things in trust management and distribution.
[1] "Trust". BusinessDictionary. WebFinance, Inc. Retrieved 10 August 2017.