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Simple English definitions for legal terms
Massachusetts Trust
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A quick definition of Massachusetts Trust:
A Massachusetts trust is a unique type of trust used by people to run a business outside of the normal legal entities like a corporation or partnership. It is owned by multiple individuals who have liability only up to the amount of their investment, like shareholders of a corporation. The trust is managed by a set of trustees who must follow extensive rules in the creating documents and often bylaws that may not exist in other kinds of trusts. Massachusetts trusts differ greatly from most other types of trusts, having characteristics resembling corporations, trusts, and partnerships. They were first used in the early 1800s to avoid certain corporate laws regarding investment in real property in Massachusetts. Most of the early Massachusetts trusts and many to this day are used for real property investment purposes.
A more thorough explanation:
A Massachusetts trust is a type of trust used by people to run a business outside of the usual legal entities like corporations or partnerships. It is also known as a common-law trust, business trust, or unincorporated business organization. This type of trust can be created in many states and countries, not just in Massachusetts.
Massachusetts trusts are owned by multiple individuals, and each person is only liable for the amount of money they invested. This is similar to how shareholders in a corporation are only liable for the amount of their investment. The trust is managed by a group of trustees who must follow specific rules outlined in the trust documents and bylaws.
Massachusetts trusts are different from other types of trusts because they have characteristics that resemble corporations, trusts, and partnerships. However, the legal status of Massachusetts trusts varies from state to state. Some states do not recognize them at all, while others allow them to be sued directly.
One of the main reasons people use Massachusetts trusts is for real estate investments. However, over time, the benefits of using this type of trust have decreased due to changes in tax and governance laws.
John and Jane want to start a business together but do not want to form a corporation or partnership. They decide to create a Massachusetts trust instead. They each invest $10,000 into the trust and become trustees. The trust is managed according to the rules outlined in the trust documents and bylaws.
In this example, John and Jane are only liable for the amount of money they invested in the trust. The trust is managed by the trustees, who must follow specific rules. This illustrates how a Massachusetts trust can be used as an alternative to traditional legal entities like corporations or partnerships.