## What is (Trust) Really, and How Does It Differ from REIT?

Many people have heard the term **Trust** but don't quite understand how it relates to investing or how it differs from REITs and common funds. Today, we will clarify this confusion and explore why investors should become familiar with this investment tool.

### What Is a Real Trust?

A (Trust) is based on a simple concept: **trust** in legal terms. A trust is a contract where the owner of an asset transfers the asset to another party (called a trustee) to manage and generate returns for the benefit of the beneficiaries.

The establishment of trusts dates back to ancient Rome but gained true popularity in medieval England. Nobles who went to war for extended periods would entrust land to trusted individuals to oversee and provide benefits to their families. Since then, trusts have become valuable tools for asset management with many benefits.

Assets within a trust can be anything that generates returns, including cash, real estate, stocks, bonds, businesses, art, or other assets.

### Who Are the Parties Involved in a Trust?

1. **Settlor (Founder/Asset Owner)**
The person who owns the asset but wants someone else to manage it. After signing, the settlor retains ownership but cannot use the asset directly.

2. **Trustee (Manager)**
The person who manages the assets according to the trust agreement. They do not have an interest in the benefits but can charge management fees.

3. **Beneficiary (Recipient)**
The person who receives income and benefits from the trust. If the trustee mismanages, beneficiaries can sue and recover the assets.

### What Are the Benefits of a Trust?

- **Convenient Transfer of Benefits**: No need to transfer the actual assets; benefits can be paid to anyone. This is why trusts are often used for estate planning.

- **Management According to the Owner’s Intent**: The trust deed must specify the settlor’s intent (Certainty of Word) clearly. Trustees are obliged to follow it.

- **Potential Tax Savings**: Depending on local laws, establishing a trust may not be considered a transfer of assets but rather a transfer of benefits.

- **Ease During Illness**: Revocable trusts allow professional management during illness or incapacity. When the owner recovers, the trust can be revoked.

- **Greater Flexibility Than Other Instruments**: Trusts are contractual agreements between parties and do not require registration, making them easier to modify.

### Types of Trusts

Trusts can be classified based on revocability (Revocable vs Irrevocable) or by purpose, such as:

- **Asset Protection Trust** – To safeguard assets
- **Blind Trust** – The owner does not know where the assets go (often used by politicians)
- **Charitable Trust** – For charitable purposes
- **GRAT (Grantor Retained Annuity Trust)** – For tax savings
- **Real Estate Trust** – To manage real estate
- **Marital Trust** – For managing marital assets
- **Special Needs Trust** – For individuals with special needs

## How Is a Trust Different from REIT and Funds?

### Trust vs REIT

REIT (Real Estate Investment Trust) is a **type of trust** that manages only real estate.

While general trusts can manage various assets, REITs are limited to real estate. Additionally, trusts and REITs are similar in that:

- Neither is a legal entity (not a corporation)
- Both are established through trust agreements
- Both are created to manage assets and distribute returns

### Trust vs Funds (Fund)

A mutual fund (Mutual Fund) pools money from many investors, managed by skilled professionals who invest and distribute returns.

The key differences are:

- **Funds = Legal Entities** (must register and obtain approval)
- **Trusts = Not Legal Entities** (are merely agreements)
- **Funds** are formal contracts, whereas **trusts** are more flexible
- **Funds** require registration and oversight by authorities, while **trusts** do not (in some countries)

## Trusts in Thailand – What Investment Options Are Available?

Thai law limits trust establishment to fundraising in capital markets. The Securities and Exchange Commission (SEC) permits two types of trusts:

### 1. Active Trust (Investment Trust)

Established to manage assets for benefits such as:

- **II/HNW Trust** – For institutional and wealthy investors
- **REIT** – For real estate investment

### 2. Passive Trust (Asset Custody Trust)

Established to preserve assets, such as:

- **ESOP Trust** – For employee stock ownership plans
- **EJIP Trust** – For employer-employee joint investment projects
- **Reserve/Sinking Fund Trust** – For debt repayment savings

Currently, **most trusts in Thailand are REITs** because they are easy to set up, and real estate assets are transparent and easy to verify, making them accessible even for beginner investors.

( What Are the Essential Elements a Trust Must Have? )Important!###

For a trust to be legally effective, it must have three elements:

1. **Certainty of Word** – The trust deed must be clear
2. **Certainty of Subject Matter** – The assets in the trust must be identifiable
3. **Certainty of Object** – The beneficiaries must be identifiable and alive

## Summary

**Trust** means a tool for managing assets through trust, created by a contract and mutual confidence.

Originally used for estate management, trusts now cover nearly all types of assets. When a trust manages only real estate, it is called a REIT.

For Thai investors, the main option is REIT— a trust that manages real estate. When the trust manages assets successfully, it distributes dividends to unit holders.

REITs open investment opportunities to the general public; even those with limited capital can invest in large assets by purchasing trust units. This makes REITs a compelling choice for long-term portfolio building.