The term oral trust refers to an agreement that is established based on the spoken words of the donor, or settlor. Oral trusts can be created for personal property, but most jurisdictions require a written document for real property such as land.
Also referred to as a parol trust, an oral trust is created based on the spoken words of the donor or settlor. They can also be created as part of a legal remedy to correct the unjust enrichment of another party as is the case with constructive trusts. Typically, jurisdictions will honor oral trusts if the donor's assets include personal property. Trusts involving real property, such as land trusts, cannot be created orally unless a written document is then signed by the donor.
Oral trusts are not considered a formal estate planning tool, since the terms of the trust can be brought into dispute. For this reason, oral trusts involving personal property can only be established if there is "clear and convincing evidence." Unfortunately, the words of the donor alone may not be considered clear and convincing evidence by the donor's heirs and their attorneys.