At the time of the creation of a trust, the trust benefits a specific individual or a group of individuals. The trust specifies them in the document. A “cestui que trust” is a person who has an equitable interest in the trust. On the other hand, the trustee gets the legal title of the trust. Cestui que use is the user of the trust. The trust is made for the benefit of this individual.  The beneficiary of the trust is called cestui que vie.

The term “cestui que trust” is associated with a trust and its beneficiaries. In this article, you will learn about the term “cestui que” and how it is related to a legal trust. Apart from that, we will also give you details about how a legal trust works. Furthermore, you will learn about the major types of trusts. Finally, we will discuss the major pros and cons of a trust. Hence, to learn more, read on through to the end of the article.

What Is Cestui Que Trust?

Cestui que vie is a French legal term that means “he who lives.” This legal term is applicable to an individual who is a beneficiary of a trust or an insurance policy. Here, the individual has rights to property and the income and profits that the property offers. However, the cestui que trust is the individual who has the right to an equitable trust rather than a legal trust in the estate assets.

Investopedia states –

“The concept is also used in modern life and health insurance policies, where cestui que vie is an individual whose life measures the duration of the insurance contract. In these contracts, cestui que vie is known as the policyholder, insured, or policy owner. Thus, while the term refers to the beneficiary of a trust or estate, it often refers to the insured and not the beneficiary of an insurance policy.”

What Is A Legal Trust And How Does It Work?

According to Investopedia,

“A trust is a legal entity with separate and distinct rights, similar to a person or corporation. In a trust, a party known as a trustor gives another party, the trustee, the right to hold title to and manage property or assets for the benefit of a third party, the beneficiary. Trusts can be established to provide legal protection for the trustor’s assets to ensure they are distributed according to their wishes.”

Apart from that, trusts also save you time and reduce paperwork. In addition to that, it helps to reduce inheritance or estate taxes. In other cases, people use trusts as closed-end funds to build a public limited company. A trust is a highly versatile instrument that one can use to resolve various purposes. They can achieve specific goals.

Basically, a trust shows a fiduciary relationship where a trustor offers a trustee the right to hold the title of the property. Apart from that, as per rights, the trustee can also hold assets for the benefit of a third party.

There are mainly three main players associated with trust:

• Trustee: It is the organization of an individual that administers the trust.
• Grantor: This is the individual who creates that trust and puts assets into it.
• Beneficiary: This person receives all or some of the assets in the trust.

What Are The Major Types Of Trusts?

According to Nerdwallet.com,

“A trust, sometimes called a trust fund or trust account, is a legal arrangement to ensure a person’s assets eventually go to specific beneficiaries. The trust creator puts assets in the trust account and authorizes a trustee to administer those assets for the benefit of the trust creator or beneficiaries. Some trusts can reduce estate taxes.”

Trusts can be of six different categories – living trusts, testamentary trusts, funded trusts, unfunded trusts, revocable trusts, and irrevocable trusts.

What Are The Major Pros And Cons Of Trusts?  

The following are the major pros and cons of trusts that you need to understand:

Pros Of Trusts

• Control is the major aspect of a trust. Here, you can not only specify the terms of the trust. This will allow you to protect your assets.
• You will have privacy with a trust. An asset in a trust does not need to go through probate, which is a part of the public record. This will help you if you have complex assets or you want to disinherit someone from the trust.
• You can transfer your assets to your heirs faster as trusts help you avoid probate court. The latter can take many months to complete.

Cons Of Trusts

The following are the major cons of trusts that you need to consider:

• To create a trust, you will need to hire an estate planning attorney. Furthermore, there are also costs related to the transfer of assets. The costs can often get over $1000.
• Trusts require legal language, and hence, statements need to be precise. This will provide the trust with legal validity. If the terms of a trust are not clear, a court has the power to overturn the trust.
• There is a lot of paperwork associated with a trust. You will need to spend time in advance while you are discussing your assets with heirs. Hence, taxes are time-consuming, as some trusts need to file their own tax returns.

Wrapping Up

Hope this article was helpful for you in understanding the term “cestui que trust.” Basically, it is a person who has an equitable interest in the trust and not a legal interest. On the other hand, a cestui que vie is a beneficiary of a trust with a legal interest along with rights to property in an estate. You can find the term common in life and health insurance policies.However, the trustee gets the legal title of the trust. The cestui que use is the individual for whom the trust is created. This arrangement of trust was pretty common in earlier days, especially during the medieval period. Do you have anything to add regarding the term and its usage in modern times? Share your ideas and opinions with us in the comments section below.

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