Also known as: legal and beneficial owner · legal beneficial ownership · absolute ownership
Written by attorneys · grounded in primary & secondary sources — see below
A division of property interests under which one party holds legal title to property while another holds the equitable right to its use and benefits, as occurs when a trust separates title from enjoyment.
Lena Lawson created a trust holding land for her niece Lila Lin. The trustee held legal title while Lila received the income and eventual possession once a specified future interest vested. When the future interest became certain to take effect in possession, the trustee transferred legal title to Lila, ending the split between legal and beneficial ownership.
Lakewood Manufacturing placed a parcel in trust with a bank as trustee holding legal title for the benefit of its shareholders. When the city took a portion for a street under eminent domain, the trustee received compensation for the legal interest while the shareholders retained their beneficial claim to the award proceeds.
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Luna Lang found a jewel and immediately transferred it to a trust with her attorney as trustee. The trustee held legal title while Luna retained beneficial ownership. When the goldsmith later claimed the jewel, the court recognized that the trust split allowed Luna to assert her beneficial interest against all but the true owner.
Lighthouse Shipping placed riparian land in a trust before a dam caused permanent flooding. The trustee held legal title and pursued the inverse condemnation claim while the beneficiaries retained the equitable right to any recovery. The court awarded damages measured by the loss in beneficial value.
Latoya Lane placed a house in trust with a bank as trustee. A guest later found a brooch inside. The trustee asserted legal title on behalf of the trust while the beneficiaries claimed the equitable interest. The court awarded the brooch to the trust because the finder had no superior claim against the beneficial owners.
Lucy Liu conveyed coastal parcels to a trust before a new regulation barred all development. The trustee held legal title and litigated the taking claim while the beneficiaries retained the right to any compensation. The court measured the loss by the destruction of the beneficial interest in development.
A trust creates the division when the settlor transfers legal title to a trustee while designating beneficiaries who hold the equitable right to enjoy the property. The trustee manages and controls the asset, but the beneficiaries receive the income and ultimately the property itself.
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When a future interest becomes certain to take effect in possession, the trustee must convey legal title to the beneficiary. The split ends and the beneficiary receives full ownership.
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Creditors of a beneficiary may reach the beneficial interest unless the trust contains a valid spendthrift provision. The trustee's legal title remains protected, but the beneficiary's equitable rights are generally subject to claims.
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A mortgage granted by the trustee encumbers the legal title. The beneficiaries' equitable interest remains subject to the mortgage unless the lender had notice of improper conduct by the trustee.
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…"Nor can it make any difference that the right is purchased previous to the passage of the by-law," for "[e]very right, from an absolute ownership in property, down to a mere easement, is purchased and holden subject to the restriction, that it shall be so exercised as not to injure others. Though, at the time, it be remote and…