The term “incumber” (also known as “incumbering”) may be unfamiliar to business professionals, but understanding it is essential for those in the legal field. Put simply, incumber means to charge or burden a property or asset with something of legal significance. The “burden” may range from a specific legal obligation to a restriction on the use or disposal of the asset.
Motives and Effects
The motives and effects of incumbering can vary depending on the circumstances. For example, financial institutions often employ incumbering as a means of protecting their investments by placing debt obligations, mortgages, or liens on the property of their borrowers, essentially transforming the asset into collateral in case of default.
Alternatively, many individuals use incumbering as a way to ensure that the assets they own pass to future generations in accordance with their wishes. A popular example is an estate calling for the assets of an individual to be held in trust until said assets are passed on to either a select beneficiary or a specified group of beneficiaries.
The Legalities of Incumbering
Legally speaking, there are also several things one should consider before incumbering a given asset. Depending on the jurisdiction, an incumbering instrument must satisfy certain criteria to be considered legitimate. For example, the instrument needs to be declared in writing and signed by the owner of the asset or their authorized representative. It is also important to note that incumbering is considered a permanent transaction, meaning that any creditor or trust beneficiary has the right to enforce it.
In Summary
In summary, anyone involved in the legal field needs to understand the concept of incumbering. This term can refer to a variety of legal instruments used to protect investments, create binding obligations, or pass assets along to future generations. When deciding to incumber an asset, one should understand the financial, legal, and other implications of the transaction.