When one thinks of the medieval Catholic Church and the crusading Knights of the Christian kings, one might think of the Gothic Architecture of their Cathedrals, wars for the Holy Land, and the combination of Church and State. However, these people created the principles upon which modern Trust theory and doctrine are based. Priests and Knights should be renowned for their tax avoidance acumen. But how did this come to be? Why would the Church and Knights require Trusts?
Technically, Trusts existed before the English. Earliest examples are found amongst the Romans who called the transaction “fiducia, to refer to a contract between two parties where one transfers property to another for security reasons in a time of danger, under the condition that it would be restored or further administered under instruction” (Steens). These transactions sound very similar to the types of transactions that take place today. Property is gifted into trust to be administered and kept safe by a trustee, before returning to the owner or whom the owner has designated to receive it. However, this structure did not have the same theory and principles that modern trust doctrine today is founded upon.
The need for Trust by the English knights and priests was born out of necessity. Knights with large estates were going to war for the Holy Land and entrusting their land to stewards to care for it while they were away for months and years. They did this by transferring the title to the stewards with the promise to return the land upon the knight’s return. The critical issue was that the English Court of Common Law did not recognize the difference between an equitable title and legal title of ownership (Steens). Therefore, when the knights transferred the land to their stewards, they received the full title, or what we might call fee simple ownership (“A History of Trusts”). These stewards did not want to give the land back to their lord.
With the transfer legally binding in the eyes of the English Court of Common Law, the knights petitioned the king to change the law. In response, the Court of Chancery or the Court of “Equity” was created. It was originally overseen by a member of the clergy (Court of Chancery) and it gave the power to separate between the “legal” and “equitable” titles of property.
This significant change in law created solutions to a large problem that plagued the church and knights. In Medieval England, property taxes were largely collected upon the transfer of property through death or knighthood which created two problems. First, since the church was an entity that did not die, the king had forbidden the church from owning land. However, the church could not afford the taxes anyway having sworn themselves to lives of poverty and simplicity (Munsinger). Secondly, the knight’s wealth was largely built around their land and not in liquid funds that could applied to the taxes. Therefore, many knights could not pay their taxes to the King upon their death.
This new separation between legal ownership and enjoyment of property empowered the knights and priests to create new tax-avoiding structures. The church could now own the equitable titles to their land and churches while giving the legal title to a layman without surrendering their control, and knights could now transfer property in trust to their relatives avoiding the King’s transfer tax completely (Munsinger). Both of these solutions were extremely beneficial to the English people at the time and created a basis for the separation of legal and equitable titles later in America.
So when you reflect upon the history of our country, England, the church, the Kings of England, and their crusading knights, remember their tax ingenuity. Turns out, even the most respected and religious people of the medieval ages also disliked taxation. It is thanks to priests and knights of old that we have the knowledge and ability to create beneficial tax strategies for millions of Americans every year.
Works Cited
“A History of Trusts.” A History of Trusts, 9 Dec. 2016, https://www.sbshlaw.com/a-history-of-trusts/.
Court of Chancery. https://collections.dartmouth.edu/occom/html/occom/ctx/orgography/org0109.ocp.html. Accessed 19 July 2024.
Munsinger, Harry. “History of Trusts.” Issuu, https://issuu.com/sanantoniobar/docs/sal-sepoct-mmc-digital/s/11055744. Accessed 19 July 2024.
Steens, Connor. The History Of The Trust – Southpac Group. 27 Apr. 2022, https://southpacgroup.com/the-history-of-the-trust/.