1. Express Trusts: Declaration of Trust Flashcards
DEF: Express Trust
A trust that the settlor expressly intends to create
2 conditions for an express trust to be enforceable:
(1) valid declaration of trust
(2) put assets in the trust (ie. put title of property to be held in trust in the hands of the trustee)
Crucial Components of a valid declaration of trust
(a) identifies trustees
(b) identifies property held in trust
(c) identifies beneficiaries (by name or description)
(d) identify powers and duties trustees have in running trust and administering trust property
DEF: Fixed Interest Trust
Under a fixed interest trust, the trustees have no discretion as to how the trust property is to
be distributed between the beneficiaries. The settlor has stipulated once and for all who the
beneficiaries are and the proportions in which they will share the trust property
DEF: Discretionary Trust
gives the trustees a discretion as to the amounts any person may receive
and/or whether particular people receive anything at all.
The three certainties:
(1) Certainty of intention (or words)
(2) certainty of subject matter
(3) certainty is objects
DEF: Certainty of intention
Clear that the person making the declaration intended to create a trust
- Words used must impose duty on trustee to hold property for someone
DEF: Certainty of Subject Matter
Clear which property is being held on trust and also what the individual interests of the beneficiaries are (how property shared)
DEF: Certainty of Objects
Clearly identifies beneficiaries
What type of trusts need to have these ‘three certainties’
(1) Express Trusts
- Lifetime Trusts
- Will Trusts
Necessary components to demonstrate certainty of intention:
(1) Words imposing duty on someone to hold property for the benefit of someone else (need not be ‘trust’)
(2) Must not be precatory words
DEF: Precatory words
Words that express a wish, hope or expectation
What happens if someone transfers property to another using precatory wording?
Likely that this is a gift
What must be certain to prove certainty of subject matter?
(1) trust property is described with certainty
(2) the settlor must define the beneficiaries’ interests with certainty
Trust property is described with certainty: Conditions
- property must be identifiable (specifics)
- thing on trust must constitute ‘property’
- must be something the settlor currently owns
- must be clear what items are specifically on trust (unclear to say ‘some of my silver’),
Can you ever create a trust over a ‘part’ of a collection of items? Or is this too uncertain?
If the items in the collection are identical, and the exact amount of the ‘part’ is specified, this is valid
What will happen if the beneficiaries’ shares or interests in the trust are not defined with enough certainty?
The trust will fail
Scenario: If the settlor intended to create a trust with themselves as trustee, but there is no certainty
of trust property…
Trust will fail, settlor is outright owner
Scenario: If settlor transfers property to 3rd party and declares that person will be a trustee over ‘some of it’ and that a gift is intended (to the trustee) over the rest….
No trust is created. 3rd party takes entire property absolutely, free of any trust.
Test for certainty of objects in Fixed-Interest Trusts:
Complete list test
Test for certainty of objects in Discretionary Trusts:
‘Given Postulant’ test (or given individual test)
Complete List Test
It must be possible to draw up a complete list of each and every beneficiary, we need:
(1) Conceptual Certainty: description of class clear and objective
(2) Evidential certainty: do we have evidence to identify all the beneficiaries that will benefit under the trust?
IF NO TO EITHER 1 or 2, TRUST FAILS
Given Postulant Test
Can it be said with certainty whether any person IS or IS NOT a member of the class of objects?
(1) conceptual certainty: sufficient clear and objective criteria from settlor
(2) do not need evidential certainty
Once a discretionary trust passes the given postulant test, what other test is required (1)?
Test for administrative unworkability
= invalid if class is SO hopelessly wide that it does not form ‘anything like a class’
- Trustees will spend so much time and money thinking about who gets what etc.
- will depend on size of the class relative to the size of the fund
Is administrative unworkability relevant for fixed-interest trusts?
NO
Capriciousness Requirement: which trusts does it apply to? What is it?
(1) applies to discretionary trusts
(2) If there is absolutely no rational reason for the trust or no rational basis on which trustees can exercise their discretion to distribute
(ie. Trust would require trustees to consider a random grouping of people who have no discernible link to settlor)
What happens if a trust has no certainty of objects?
Resulting trust in favour of the settlor (because express trust cannot be created)
DEF: Beneficiary Principle
To be valid, a trust must be for the benefit of individuals
Rules against perpetuity: how do these apply for trusts for individuals?
Rule: Rule against remoteness of vesting
- interests must vest within relevant perpetuity period
- trusts created on or after 1 April 2010 (125 years)
Do lifetime trusts have be in writing?
No, they can be made orally, but should be made in writing.
Requirements for Valid Oral Declaration of trust (lifetime trust)
a. Person A has to prove what b said (Question of fact)
b. A has to show that this demonstrated an intention to declare trust (Question of Fact)
What formalities are there for trusts created over LAND?
s 53(1)(b) LPA 1925:
- the declaration of trust must be evidenced in SIGNED WRITING by the settlor (can be said orally and written later)
- If not, trust is unenforceable
Trusts over land: can emails suffice as written evidence?
Yes, if they are signed off by typing (name, initials, nickname which they are known by etc.)
- OR if there is a signature block in email settings for all outgoing mail (esp when there is a salutation at the end)
If someone makes an oral declaration of trust over property, what should they do to ensure their declaration is valid
Copy down the terms and sign this. Need not be sent to beneficiary
- Must contain all terms material to the trust
What is an inter vivos trust?
A trust declared during the settlor’s lifetime
- Valid in its oral form but will need to be proven by signed writing
- if formalities not complied with it may still be valid, albeit unenforceable
Fixed Trust: Presumption when settlor does not stipulate exact share for beneficiaries
Equity presumes they will share it equally
