1. Express Trusts: Declaration of Trust Flashcards
What is equity?
A distinct body of rules and principles.
What are the purposes of equity?
To mitigate the rigours of the common law and provide more options for redress.
What is the most important form of equity?
The trust.
What are the maxims of equity?
‘He who comes to equity must come with clean hands’ and ‘Equity will not assist a volunteer’.
What does ‘property’ encompass?
Money, shares, land, personal possessions.
What is the difference between legal and equitable ownership?
Legal ownership is outright ownership, while equitable ownership involves a trust.
What is a trust?
An arrangement where a trustee holds property for the benefit of another.
Who is the settlor?
The person who creates a trust.
Who can be a trustee?
A third party or the settlor themselves.
What is a lifetime trust?
A trust created during the settlor’s lifetime.
Who are the beneficiaries of a trust?
Those who benefit from the trust.
What is the duty of a trustee?
To deal with property for the benefit of the beneficiaries.
Who can enforce the duty of a trustee?
The beneficiaries.
What is the role of equity in relation to the common law?
To mitigate its rigours.
What does equity focus on?
The consciences of the parties involved.
What are equitable remedies?
Remedies provided by equity.
What is the role of equity in providing redress?
To provide more options for redress.
What is the concept of trust?
When one person holds legal interest and another holds equitable interest in a property.
What is an absolute owner?
Someone who has both legal and equitable ownership of a property.
What is the practical significance of equitable interest in an absolute owner?
None, as they already have full ownership in law.
What is a settlor?
The person who creates the trust and sets out its terms.
What are the terms of the trust often referred to as?
The declaration of trust or trust deed.
What must the settlor ensure once they have set out the terms of the trust?
That the trustee gets legal title to the trust property.
When is the trust considered complete?
When the trustee has legal title to the trust property.
Who are the trustees?
The person or people chosen to hold the trust property for the benefit of the beneficiaries.
What must the trustee do?
Follow the terms of the trust and manage the trust property until the beneficiaries become entitled to it.
Who are the beneficiaries?
The people who will ultimately benefit from the trust and the managed property.
What happens to the ownership of the property held on trust?
It automatically splits up, with legal title going to the trustee and equitable or beneficial title going to the beneficiary.
What is the real value of the trust?
The equitable title that belongs to the beneficiary.
What are the characteristics of legal title?
It looks like the absolute owner, is responsible for managing the property, and is subject to onerous duties for misusing trust property.
What are the characteristics of equitable title?
It carries all the benefits of the trust property, can be enforced against third parties, and can be sold or given away.
What are the duties of trustees?
The duties include managing the trust property, following the terms of the trust, and not misusing the trust property.
What is the main duty of a trustee?
To look after the trust fund until beneficiaries are entitled to it.
What is the duty of a trustee regarding investing the trust fund?
To consider investing and growing the trust fund for the benefit of the beneficiaries.
What types of investments might trustees purchase for a long-term holding?
Riskier forms of investments that are more likely to grow in value over time.
What types of investments might trustees purchase for a short-term holding?
Safer forms of investments to retain the value of the trust fund.
Why use a trust instead of gifting property?
Trusts provide control and management by a trustee, ensuring decisions are made in the best interests of beneficiaries.
What can a declaration of trust or deed of trust allow trustees to do?
Drip-feed money early to beneficiaries, delay the entitlement of beneficiaries, or impose conditions on their entitlement.
What is the purpose of a trust?
To split up the management of property from the enjoyment of that property.
When does a trust arise in the context of private clients?
When people of all means plan for the future (estate planning).
In what context are houses owned in a trust arrangement?
Land ownership where multiple people own a house.
How are many charities organized?
As trusts.
What legal tool is often used to establish pension schemes?
Trusts.
What are express trusts?
Trusts that the settlor expressly intends to create.
What are examples of express trusts that benefit individuals?
Bare trusts, contingent interest, life interest, discretionary trusts.
What are express trusts to achieve a purpose?
Trusts where the settlor leaves property to achieve a specific purpose or objective.
What are examples of express trusts to achieve a purpose?
Putting money on trust to build a gymnasium, improve educational standards.
What are implied trusts?
Trusts that arise even without express intention from the settlor.
What are resulting trusts?
Implied trusts presumed to be intended by the settlor.
What are constructive trusts?
Implied trusts created to achieve a fair result between parties.
What is the purpose of a constructive trust?
To prevent the legal owner from having full enjoyment of the property.
What are the two main types of implied trusts?
Resulting trusts and constructive trusts.
What is the family tree of trusts?
A classification of trusts based on their nature and purpose.
When can a trust be created?
Either during the settlor’s lifetime or in their will upon death.
What are lifetime trusts?
Trusts created to take effect during the settlor’s lifetime.
What must the settlor do to create a valid lifetime trust?
Make a valid declaration of trust and transfer property into the trust.
What is the process of constituting a trust?
Transferring trust property to the trustee.
What is a will trust?
A trust that takes effect upon the testator’s death.
What are the requirements for a valid will trust?
Valid declaration of trust in a will and directing title to the trustee.
What is the residuary estate?
What remains of the settlor’s property after debts, tax, and specific legacies.
Who is the residuary beneficiary?
The person named to receive the residuary estate.
What happens if a settlor attempts to create a lifetime trust but something goes wrong?
Equitable interest goes back to the settlor’s residuary estate.
