The concept of Trust dates back to the 11th century during the crusade between Western Asia and Europe. When people went to war, they were not sure of their return, it then became crucial for crusaders to apply necessary measures in ensuring their properties are properly dispensed in the likelihood that they do not return.
The measures involved appointing friends, who will be in charge of the estate and its distribution. In its modern-day form, trusts involve situations whereby individuals control or plan the distribution of their property or estate either in their life time or after their deaths.
A trust is created by an individual when he executes a written Declaration of Trust directing one person or more persons (sometimes this can be a corporate trust company) called a trustee(s) to hold property or assets in accordance with the terms and conditions contained in the trust instrument for the benefit or one or more persons or a section of the general public, called the ‘beneficiaries’ or cestui que trust, who are the equitable owners of the property or assets, while the legal interest is vested in the trustee.
Trusts may also be created in favour of those advancing moneys for specific purposes and other varying purposes. These may be in respect of customers’ deposits, loans generally or to insolvent companies or companies in liquidation, money for payment of sub-contractors, moneys advanced to borrowers from which they are to pay third party creditors.
This practice is however common but not limited to insolvency cases. Creating trusts in favour of creditors can take many forms. It is important to note that to create a trust of money requires no formality of writing and there is no need to use the word ‘trust’.
However, it is imperative that specific agreement or memorandum be put in place for this, in order to ensure certainty of intention to create a trust.
In Nigeria, as in most jurisdictions, the law of trusts is governed by statutes and case law. The trustee is charged with the management of the trust property and holding the same according to the instructions of the settlor in the trust instrument.
It is however possible for a person to be both the trustee and the beneficiary in a trust. The written Declaration of Trust usually names the first trustees while it specifies the position for the appointment of successive trustees and contains the terms of the trust.
These terms set out the powers and duties of trustees and the benefits accruing to the beneficiaries. Other ways of creating a trust are through the exercise of power of appointment, transfer of trust either during someone’s lifetime or in someone’s Will, by contract and statute.
The Trust Industry in Nigeria although not in its infancy still remains untapped while requiring a lot of restructuring and development. There are about 26 recognised corporate trustees organisations in Nigeria with products that cover private trust and institutional trust. These organisations – one of which is PAC Trustees Limited, a subsidiary of PanAfrican Capital Holdings Limited and established in 2006 – are built on the back of integrity as required by any individual looking to partner a Trustee.
Their activities are largely regulated by the Securities and Exchange Commission (SEC) to ensure adherence to stipulated costing and execution of Trusts. The capacity in the industry is evolving and the Association of Corporate Trustees has been organising trainings and awareness schemes to build the interest of young people in the industry.
Typically, in Nigeria’s trust industry, there are some major challenges which have been there. In the area of public awareness, many people don’t know what Trust industry is all about and interestingly, this is one of the major areas that can be used to drive the Nigerian economy.
Trust helps in preserving family assets, or increasing them. An individual may wish to ensure that wealth accumulated over a lifetime is not divided up amongst the heirs, but is retained as one fund to accumulate further, with provision for payments to members of the family as the need arises while preserving some assets for later generations. A lot of assets have depreciated over a period of time because people did not plan. Avoiding wealth depreciation and waste can be achieved through a trust.
Trusts can also be one of the most effective ways of protecting assets. In simple terms, assets transferred to a trust no longer form part of the settler’s property, so the trust assets cannot be seized if a Settler gets into financial difficulties. Except under certain circumstances where the transfer into trust may be set aside and a court may order the trust assets to be transferred back to the settler.
A trust also provides a vehicle by which a person can provide for those who may be unable to manage their own affairs such as infant children, the aged, the disabled or persons suffering from illness. One key advantage of a Trust is that it provides confidentiality and privacy.
Above all, the goal of a Trustee should be, “To preserve and increase the wealth of esteemed clientele through bespoke Trust services,” as clearly stated in the PAC Trustees Mission.