Unlike Wills, you can have an enforceable Trust that is not written down—referred to as an oral Trust. The idea behind an oral Trust is that you can give property (other than real property) to someone as a “Trustee” and ask them to hold it in favor of a beneficiary. The problem, of course, is that proving the Trust exists, and what the terms are, can be a tricky proposition because nothing is written down. Also, oral Trusts do not work for transfer of real property because the Statute of Frauds requires a writing for transfer of real property.
Oral Trusts are typically used in very simple situations where someone just wants to hand property over to someone through a conduit—that is the Trustee. But in most cases where an oral Trust is argued in Court, it is an afterthought. In other words, it is an argument that is made in hindsight based on the facts. Rare is the case that someone sets out to intentionally create an oral Trust.
And in most cases you should NOT do anything by an oral Trust because it has obvious drawbacks in that nothing can be proved. But if you find yourself in a heated legal case, there may be opportunities to bolster your side with an oral Trust argument.
For example, lets say your mom wants to give money to a grandchild, but the grandchild is a minor and can’t receive the gift. Instead, mom gives the money to daughter and asks her to hold it for the benefit of grandchild. That is an oral Trust. There are not that many details of the Trust, but the basic point is that the money is being held by daughter for the benefit of someone else. Daughter, on the other hand, disagrees and says the money belongs to her alone. There’s the problem, oral Trusts are hard to prove. But that fact pattern could give rise to an argument on behalf of grandchild, provided that, there are at least some facts to support that position.
The bottom line is that oral Trusts are legally recognized. You should never use them, but you can argue the underlying facts to try and create one from past events.
