Abstract
The trust function in banking and finance involves the holding of property by a trustee who has power to administer it. Every trust function involves legal responsibilities and is, therefore, confronted with the likelihood of legal risk. One of the many aspects of legal risk is that of loss arising from misbehavior, inability or unwillingness to comply with assigned trust function(s). Legal risk can also come from unexpected application of a law or regulation, or for other reasons such as impossibility to enforce a contract. A trust exists where a trustor, settler, or creator commits property to a trustee to administer: in accordance with terms of a trust agreement, and for the benefit of a well-defined beneficiary. Trusts can be useful vehicles to safeguard assets from rapid spoilage by beneficiaries, overeager tax authorities, or plain mismanagement of investments. On setting up a trust, the investor who places the assets into this trust become the trust or empowering another party to act on one's behalf, whether the wealth is real estate property, cash, stocks, bonds, or any other commodity.
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