Statutory trust only: Overview, definition, and example
What is statutory trust only?
A "statutory trust only" refers to a trust structure that is created and governed by a specific statute or law, with its powers, duties, and operations defined exclusively by the relevant statutory framework. Unlike common law trusts, which are based on judicial precedents and the discretion of trustees, a statutory trust only operates under the guidelines set forth in the governing legislation. This type of trust is typically used for particular purposes such as real estate transactions, asset securitization, or certain types of fiduciary responsibilities. The term "statutory trust only" indicates that the trust’s creation, management, and operations are solely dictated by the statute and cannot be altered by the parties involved, unlike traditional trusts that may allow for some flexibility based on the agreement of the parties.
Why is statutory trust only important?
A statutory trust only is important because it offers a clear and defined legal structure that is set by statute, minimizing ambiguity and providing a consistent framework for operations. It ensures that the trust is recognized and enforceable under the law, making it easier to navigate legal, financial, and tax-related matters. This structure can provide benefits such as asset protection, tax advantages, or compliance with specific regulatory requirements. By operating under the strict boundaries of the statute, a statutory trust only provides transparency and predictability, which can be appealing to parties involved in the trust’s formation and management, especially in complex transactions or specialized business arrangements.
Understanding statutory trust only through an example
For example, in a real estate transaction, a company might create a statutory trust only for the purpose of holding and managing a specific asset, such as a property portfolio. The terms of the trust are governed entirely by the relevant real estate statute, and the trust’s activities—such as the sale, leasing, or distribution of income from the properties—are strictly regulated by that law. The parties involved cannot alter the operations of the trust outside of what is allowed under the statute, ensuring that the trust’s activities remain compliant with legal requirements and regulations.
In another example, a financial institution may establish a statutory trust only for the purpose of managing and distributing assets in a securities offering. The statutory trust might be structured to comply with specific regulations governing securities and asset management, ensuring that the institution follows the legal framework laid out by the applicable laws, such as the Investment Company Act. The statutory trust only would be limited to the actions permitted under this statute, providing a safe and predictable mechanism for managing the assets and complying with regulatory standards.
An example of a statutory trust only clause
Here’s how a statutory trust only clause might appear in a legal agreement:
“The Trust is established as a Statutory Trust only pursuant to [Statutory Law Reference]. The operations and management of the Trust, including the holding, administration, and distribution of assets, shall be governed exclusively by the provisions of [the relevant statute], and no provision of this Agreement shall alter or expand the powers granted under such statute.”
Conclusion
A "statutory trust only" is a trust created and managed under the specific provisions of a statutory law, with no flexibility outside of the statutory framework. This legal structure is commonly used for specialized purposes such as real estate management or asset securitization, providing clear, predictable guidelines for the operation of the trust. By operating within the parameters set by law, a statutory trust only ensures compliance, minimizes risk, and offers clarity for all parties involved.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.