How trust funds made the modern world
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How trust funds made the modern world<br>In progress we trust
Benedict Springbett<br>Jun 16, 2026
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Trust funds do not have a good reputation. The ‘trust fund baby’ is the child of a wealthy family whose lavish lifestyle is funded by their parents’ money. As well as the super-wealthy, trusts are associated with tax avoidance, offshore financial centres, and shadowy, complex chains of ownership of assets.<br>In fact, trusts are everywhere. In the parts of the world which use law derived from English law, they are as important a legal concept as contracts or negligence. Nearly all shares in Britain are traded on the basis of trusts. Every home jointly owned by a couple involves a trust. They play just as important a role in America, Australia, Canada, Ireland, Hong Kong and Singapore, whose legal systems are also derived from English law.<br>For much of their history, trusts have been an instrument of social and economic progress. They allowed married women to own property when the rest of the law prohibited it. England’s rich tradition of clubs and societies owes its origins to the institution of the trust, which enabled much greater freedom of association in the early modern and industrial period than in other European countries. The London Stock Exchange and the insurance marketplace Lloyd’s were both originally trusts.<br>But trusts are not native to the law of France, or Germany, or Japan, or of any legal system which is not derived from English law. Trusts arose almost by accident. For centuries the trust enabled people, through legal trickery, to avoid bad laws that were holding back progress. In the words of English legal historian FW Maitland, it enabled the country to “enter into one large conspiracy to evade its own laws, to evade laws which it has not the courage to reform”.<br>For a large part of its history, England had two parallel court systems: the ordinary common law courts, and the courts of equity. The courts of equity existed to mitigate the harshness of the common law, which had ossified into myopic proceduralism that often worked injustice. It was in those courts of equity that the institution of the trust was created, initially to enable people to pass on assets at a time when will-making was severely restricted.<br>There is a wider lesson here for fixing broken systems of regulation. Rather than try to reform the common law system, the answer in medieval England was to set up a parallel system of justice. Over time, the trust was used to experiment with sidestepping aspects of the law which were holding back progress. Once the old law was almost irrelevant, in wills, the property of married, wealthy women, and associations, it was finally reformed to catch up, normalising a practice which had previously used trusts.<br>Subscribe. Trust me.
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What is a trust?
A trust allows an asset to have two owners. There is the legal owner, known as the trustee, who holds the formal, legal title to the asset. But there is also the beneficiary, for whose benefit the asset is held, and who is entitled to the proceeds of the trust. The trustee controls how the asset is used: subject to the terms of the trust, they can sell it, lease it, or deal with it how they like. The trustee is subject to strict duties both to act within the terms of the trust, and to act with single-minded loyalty to the beneficiary, who can sue them if they breach their duties.<br>As we shall see, the trust is an extremely flexible concept. A court will often find that property is being held on trust, even if nobody intended to set one up, if it enables the court to remedy some injustice relating to property.<br>This separation of ownership and control has its origins in the medieval period.1 English law was unusually well developed by the standards of Europe: in the time of Henry II, who reigned 1154–1189, it was centralised into a single system, focused around the King and his professional judges who travelled around the country. This was good for the King, for whom dispensing justice was a source of revenue. It also helped him to keep the peace: Henry had come to the throne in the aftermath of the Anarchy, a nineteen-year civil war between King Stephen and Henry’s mother, Matilda.<br>Centralised law was also beneficial for litigants, for whom the King’s justice was superior justice. It was harder to bribe a professional judge than a local notable, and rather than trial by battle, or trial by ordeal, legal disputes were resolved by a trial by jury. By the middle of the thirteenth century there was a legal profession, and by the fourteenth century lawyers were being trained in law schools, the Inns of Court, which still exist today.<br>England’s prodigious development of a unified legal system was rare. In medieval France, justice was dispensed by a muddle of royal, seigneurial, ecclesiastical and municipal jurisdictions, much of it administered by local lords...