The phrase "private equity trust" causes confusion, partly because "private equity" means something else entirely in finance. Here it means something simpler and older: a trust that is private rather than registered, and that is established in equity.
Statutory versus non-statutory
A statutory trust is about as private as a corporation. It is created under statute, it is registered or recorded, and it can be pierced in court with comparatively little difficulty.
A non-statutory trust is more private, because it is not registered or recorded publicly. It exists as a contract and a relationship of duty rather than as an entity granted by a legislature. That difference is the origin of most of the other differences people notice.
What equity jurisprudence means here
Equity in this context is not a synonym for fairness in the casual sense. It refers to a distinct legal jurisdiction — equity jurisprudence — that has existed for more than seven hundred years. It is often described as the law of fairness and right dealings among men and women, and it is frequently considered the man-made law that comes closest to approximating natural law.
Two features of equity matter for trusts. Equity's principal remedy is compelled specific performance: it makes parties do what they undertook to do. And equity acts on the conscience. It is, at bottom, about doing the right thing.
Why people use them
- Privacy — a non-statutory trust is not a public record of what you hold
- Asset protection — assets are held by trustees at arm's length from the people who benefit
- Limited liability — the trust, not the individual, is the party to its own affairs
- Succession — the trust continues without probate when people change
- Stewardship — the arrangement is designed to be administered, not merely owned
The part people underestimate
A private trust's strength depends on it being genuinely private and genuinely administered. There is a distinction worth holding on to between a trust's private internal operations and the activities where it interacts with public institutions and their compliance requirements. Both exist. Understanding the boundary is a large part of operating a trust system well.
This is why education comes before establishment in our recommended order. The free Trust Establishment Masterclass covers this ground before anyone commits to a structure.