Trust is important, but it is also dangerous. It is important because it allows us to form relationships with people and to depend on them—for love, for advice, for help with our plumbing, or what have you—especially when we know that no outside force compels them to give us such things. But trust also involves the risk that people we trust will not pull through for us; for, if there were some guarantee that they would pull through, then we would have no need to trust them. Thus, trust is also dangerous. What we risk while trusting is the loss of the things that we entrust to others, including our self-respect, perhaps, which can be shattered by the betrayal of our trust.
Because trust is risky, the question of when it is warranted is of particular importance. In this context, “warranted” means justified or well-grounded (where well-grounded trust successfully targets a trustworthy person). If trust is warranted in these senses, then the danger of it is either minimized, as with justified trust, or eliminated altogether, as with well-grounded trust. Leaving the danger of trust aside, one could also ask whether trust is warranted in the sense of being plausible. Trust may not be warranted in a particular situation because it is simply not plausible: the conditions necessary for it do not exist, as is the case when people feel only pessimism toward one another. This entry on trust is framed as a response to the general question of when or whether trust is warranted, where “warranted” is broadly construed to include “justified,” “well-grounded” and “plausible.”
A complete philosophical answer to this question must explore the various philosophical dimensions of trust, including the conceptual nature of trust and trustworthiness, the epistemology of trust, the value of trust, and the kind of mental attitude trust is. To illustrate how each of these concerns is relevant, note that trust is warranted, that is,
Plausible, again, only if the conditions required for trust exist (e.g. optimism about one another’s ability). Knowing what these conditions are requires understanding the nature of trust.
Well-grounded, only if the trustee is trustworthy, which makes the nature of trustworthiness important in determining when trust is warranted.
Justified, sometimes when the trustee is not in fact trustworthy, which suggests that the epistemology of trust is relevant.
Justified, often because some value will emerge from the trust or because it is valuable in and of itself. Thus, the value of trust is important.
Plausible, only when it is possible for one to develop trust, given one’s circumstances and the sort of mental attitude trust is. For example, trust may not be the sort of attitude that one can will oneself to have without any evidence of a person’s trustworthiness.
This piece explores these different philosophical issues about trust. It also deals predominantly with interpersonal trust, which I take to be the dominant paradigm of trust. Although some philosophers write about trust that is not interpersonal, including “institutional trust” (i.e. trust in institutions; see e.g. Potter 2002, Govier 1997, Townley and Garfield 2013), trust in government (Hardin 2002) or in artificial intelligence (which may only be person-like; see e.g. Coeckelbergh 2012, Taddeo and Floridi 2011), and “self-trust” (Govier 1993, Lehrer 1997, Foley 2001, McLeod 2002, Goering 2009, Jones 2012b, Potter 2013), most would agree that these forms of “trust” are coherent only if they share important features of (i.e. can be modeled on) interpersonal trust. Hence, I assume that the dominant paradigm is interpersonal.
What is a ‘Trust’
A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. In finance, it can also be a type of closed-end collective investment fund built as a public limited company.
BREAKING DOWN ‘Trust’
Trusts are created by settlors who decide how to transfer parts or all of their assets to trustees. These trustees hold on to the assets for the beneficiaries of the trust. The rules of a trust depends on the terms under which it was built on. In some areas, it is possible for older beneficiaries to become trustees. For example, in some jurisdictions, the grantor can be a lifetime beneficiary and a trustee at the same time.
There are two types of trusts: the living trust and the testamentary trust.
A living trust – also called the revocable trust or the inter vivos – is a written document in which an individual’s assets are provided as a trust for the individual’s use and benefit during his lifetime. These assets are transferred to his beneficiaries at the time of the individual’s death. The individual has a successor trustee who is in charge of transferring the assets.
A testamentary trust, also called a will trust, specifies how the assets of an individual are designated. This document arises at the time of the testator’s death.
Common Purposes for Trusts
Some individuals use trusts simply for privacy. The terms of a will may be public in some jurisdictions. The same conditions of a will may apply through a trust. Individuals who don’t want their wills publicly posted opt for trusts instead.
Trusts can also be used for estate planning. Typically, the assets of a deceased individual are passed to the spouse and then equally divided to the surviving children. However, children who are under the legal age of 18 need to have trustees. The trustees only have control over the assets until the children reach adulthood.
Trusts can also be used for tax planning. The taxes relating to trusts are typically different compared to achieving the same thing through another route. In some cases, the tax consequences provided by using trusts are lower compared to other alternatives. As such, the usage of trusts has become a staple in tax planning for individuals and corporations.