Shapeless Trusts and Settlor Title Retention: An Asian Morality Play

The recent Chinese Trust Act has created a stir in trusts scholarship by taking no position on the location of title in the trust assets, not requiring that title to vest in the trustee. The Act thus permits settlors to retain title in the trust assets despite having appointed another as trustee. Leading trust scholars have criticised the Chinese Act’s noncommittal approach, pointing to the difficulties created by settlors continuing to own the trust assets. The present article attempts to evaluate the efficacy of such “shapeless trusts” and “settlor title retention trusts” by examining the career of the Chinese Act’s principal predecessor – the Israeli Trust Act of 1979, which established the world’s first shapeless trust regime. I identify two advantages of such regimes. One is their making trustees’ duties and beneficiaries’ effective remedies applicable in fiduciary situations conventionally analysed as agency, nomineeship or, under civil law systems, mandate. A further advantage is that “settlor title retention trusts” may help introduce the trust mechanism to potential settlors unaccustomed to it, who may be deterred by the prospect of giving away title in their property.