Trusts and Islamic Law

Using the term trust in connection with Islamic law invites some misunderstanding. Islamic law and for that matter Arab laws do not recognise a distinction between equitable and legal title. Therefore the concept of trust is fundamentally different in connection with Islamic law including its commercial and financial areas.

The Contract of Deposit illustrates the point. The Contract is intended for the safe-keeping of property and whilst possession does change Islamic law does not deem legal title to the property to pass with possession (in this it is not dissimilar to a trust) but it also does not impute beneficial ownership to the possessor of the property. Furthermore the depositor (settlor if it were an English trust) may demand return of the deposit at anytime, contrary to the situation in an irrevocable trust.

Among the trust-like structures in Islamic law, the Islamic Endowment or as it is better understood by lawyers the Islamic Charitable Trust comes closest to the English trust. However here also there is no conception of equitable title even though there are beneficiaries. The title of property in this charitable trust does leave the settlor, the creator of the trust, but it does not vest elsewhere unless as is the conventional although not uncontested view it vests in God.