2. Express Private Trusts Flashcards
What are the three certainties required for a valid express private trust?
Certainty of:
- Intention to create a trust
- Subject matter i.e. property
- Objects i.e. beneficiaries
- The intention is manifest in the words which the settlor uses, whether written or spoken
- The subject matter is the property to be held on trust;
- The objects are the human beneficiaries who take the benefit of the trust.
All three must be present.
When must a settlor’s intent to create a trust be expressly manifested?
When they own the property
However, whilst the intent must exist at the time the property is owned, what can arise later as evidence of this?
Subsequent conduct consistent with an earlier intent
When must the settlor intend the trust to take effect when they express their intent?
Immediately
Whilst the settlor must intend the trust to take effect immediately, what should this not be confused with which is actually allowed?
The settlor’s intent must be that the trust take effect immediately, not at some future time—although a future interest can be trust property.
What is a precatory expression and what is the effect of this?
A settlor’s mere hope, wish, or suggestion that property be used in a certain way is not sufficient to show intent to create a trust, i.e. impose a binding obligation on a trustee
Can intention to create a trust arise informally, or through conduct?
Yes
What quality of language will normally defeat intention to create a trust?
Where it is ambiguous or precatory language.
What happens when a trust fails for uncertainty of intention?
The property passes as a gift to the person who would be trustee
Whilst the subject matter must be clear, when may an apparently uncertain description be valid?
An apparently uncertain description of property may be valid if it can be objectively defined.
For example, a court has found that a trust to pay “a reasonable income” to the beneficiary was valid. A trust of “the bulk of my estate” will fail for lack of certainty.
What factor determines whether a fractional share of property is valid?
Whether it is tangible or intangible.
Intangible, e.g. shares: Fractions, e.g. 50% or half are valid
Tangible: Not valid unless the fraction has been segregated for the trust, even if the property is identical, e.g. wine of the same type and vintage
Whilst a future interest can be held in a trust, what cannot be held in a trust ?
An interest not yet in legal existence, e.g. an expected interest in property
Even where property as such is sufficiently identified, what will render a trust for that particular piece of property void?
If the amount a beneficiary is to receive is not defined with sufficient clarity.
What happens when a trust fails for uncertainty of subject matter?
Property reverts to settlor or the settlors estate.
When a collective term for a class of beneficiaries is used, what must it be capable of? What are some examples of valid and invalid collective terms and why?
It must be capable of objective definition.
Nieces, nephews, brothers, sisters are valid because these can be defined by reference to the settlor’s actual family.
Friends, acquaintances are not valid because these are a fluid groups, changing all the time and over time.
Where a collective term is used for a class of beneficiaries, what are the two types of test used and what determines which one is used?
- Complete List Test - used for fixed trusts
- Given Postulant Test - used for discretionary trusts
What does the complete list test require for a fixed trust to be valid where a collective term is used for a class of beneficiaries?
Trustee must be able to draw up a complete list of beneficiaries
Under the complete list test, do all beneficiaries need to be existence at the time?
No, as long as they are ascertainable by the time their interest vests
What two certainties does the complete list test require?
- Conceptual certainty (i.e. niece, nephew vs. friend as discussed)
- Evidential certainty (there must be evidence of these parties)
Under the complete list test, will a fixed trust fail if a beneficiary is known to exist but cannot be traced?
No
What is required under the given postulant test for a discretionary trust?
Definition of class must be sufficiently clear to enable to the trustees to assess the potential range of beneficiaries and to enable the court to decide if the trustees acted within their powers in exercising their discretion.
It is not necessary for the whole range of potential beneficiaries to be ascertainable.
Why will evidential uncertainty not cause a discretionary trust to fail?
Because a potential beneficiary who cannot prove they are within the class has no right to be considered by a trustee
Regarding objects, i.e., the beneficiaries, what will cause a discretionary trust to fail?
Where there are so many beneficiaries that the trust is administratively unworkable. For example, a discretionary
trust for “all or some of the inhabitants of West Yorkshire” (2.5 million people) is deemed too wide to enable the trustees to carry out their duty of selection.
What happens when a trust fails for uncertainty of objects?
A resulting trust in favour of the settlor or the settlor’s successors is presumed.
What does the remoteness of vesting rule provide?
An interest under a trust is void if it does not or will not vest within 125 years
Intervivos Trusts
What is a declaration of trust?
Settlor’s demonstration by words or conduct that they intend the trustee (or themselves as trustee if it is transfer to self) to be legally bound, satisfying three certainties, beneficiary principle, and perpetuity
What is the legal effect of a valid declaration of trust being made?
It cannot be revoked
In addition to a declaration of trust, what is required for an inter vivos trust where a third party is acting as trustee?
The settlor must transfer the trust property in the appropriate legal fashion
Which is constitution?
The process of transferring legal title to property from one party to another
Under the every effort test, what must be done for equity to perfect an imperfect gift?
Donor/settlor has done everything required of them and has put the property outside their control.
Will not apply if they retain possession.
What are the three requirements for a donatia mortis causa, i.e. gift by reason of death?
- Donor delivers property to donee while in objective contemplation of imminent or impending death
- Donor intends that the property be given to donee if donor dies, or returned if donor survives, and
- Donor does indeed die
What triggers the fortuitous vesting rule in Strong v Bird and how does it apply to (1) gifts and (2) trusts?
Triggered by donor/settlor dying before transfer is made.
Gifts: If the recipient becomes the donor’s personal representative, the transfer is complete in law and enforceable.
Trusts: If the trustee becomes the settlor’s personal representative, the transfer is complete in law and enforceable.
When does the fortuitous vesting rule in Strong v Bird not apply?
When there is evidence to suggest donor changed their mind before they died, by doing something inconsistent with the giving of a gift
When may proprietary estoppel be available to a donee in relation to an incomplete gift?
Where they can prove a detriment due to their reliance on an assurance
What two things are required of the claimant’s reliance?
- Must be reasonable
- Must actually cause a detriment
What is the distinction between a fully secret trust and a half secret trust?
A fully secret trust looks like an outright gift to a nominated person, whereas a half secret trust will mention that a trust exists but keeps the identity of the beneficiary secret
In contrast to a fully secret trust, in order for a beneficiary under a half secret trust to enforce, when must their identity be communicated to the trustee?
At or before the making of the will
Comparison Chart Secret Trusts & Half Secret Trust?
What are the two requirements for the beneficiaries to call for the transfer of trust property under the rule in Saunders v Vautier, which trustees are obligated to comply with?
All beneficiaries must:
- Together have an absolute interest in the property, and
- Be of full age and sound mind
