Part 5: The Nomenclature For The Future

This article is part of a mini series that explores the relationship between sham trusts and illusory trusts.

As set out in Part 1, the terms "sham trust" and "illusory trust" both describe different things. It could therefore be argued that both terms have a place in the nomenclature of the future. We disagree, however, for only one of these terms describes a thing that exists and therefore only one serves a useful purpose.

'To call a trust "illusory" is a convenient, although analytically inaccurate, label. The trust transaction is illusory when the true intention gathered from the trust instrument was to leave the beneficial interest in the purported settlor of the trust rather than to create a trust for the beneficiaries named in the instrument.'¹ In other words, an illusory trust is a trust that does not exist.