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SQE1 - Trusts > 2. Express Private Trusts > Flashcards

2. Express Private Trusts Flashcards

1
Q

What are the three certainties required for a valid express private trust?

A

Certainty of:

  1. Intention to create a trust
  2. Subject matter i.e. property
  3. Objects i.e. beneficiaries
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2
Q

When must a settlor’s intent to create a trust be expressly manifested?

A

When they own the property

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3
Q

However, whilst the intent must exist at the time the property is owned, what can arise later as evidence of this?

A

Subsequent conduct consistent with an earlier intent

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4
Q

When must the settlor intend the trust to take effect when they express their intent?

A

Immediately

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5
Q

Whilst the settlor must intend the trust to take effect immediately, what should this not be confused with which is actually allowed?

A

Where the subject matter of the trust is the settlor’s future interest

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6
Q

What is a precatory expression and what is the effect of this?

A

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

I’m giving you £10,000 in the hope you will use it for your child’s education vs I’m giving you £10,000 to use for your child’s education

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7
Q

Can intention to create a trust arise informally, or through conduct?

A

Yes

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8
Q

What quality of language will normally defeat intention to create a trust?

A

Where it is ambiguous

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9
Q

What happens when a trust fails for uncertainty of intention?

A

The property passes as a gift to the person who would be trustee

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10
Q

Whilst the subject matter must be clear, when may an apparently uncertain description be valid?

A

When it is capable of objective definition, e.g. a reasonable income

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11
Q

What factor determines whether a fractional share of property is valid?

A

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

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12
Q

Whilst a future interest can be held in a trust, what cannot be?

A

An interest not yet in legal existence, e.g. an expected interest in property

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13
Q

Even where property is sufficiently identified, what will render a trust void?

A

If the amount a beneficiary is to receive is not defined with sufficient clarity

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14
Q

What happens when a trust fails for uncertainty of subject matter?

A

Property reverts to settlor

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15
Q

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?

A

It must be capable of objective determination.

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.

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16
Q

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?

A
  1. Complete List Test - used for fixed trusts
  2. Given Postulant Test - used for discretionary trusts
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17
Q

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?

A

Trustee must be able to draw up a complete list of beneficiaries

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18
Q

Under the complete list test, do all beneficiaries need to be existence at the time?

A

No, as long as they are ascertainable by the time their interest vests

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19
Q

What two certainties does the complete list test require?

A
  1. Conceptual certainty (i.e. niece, nephew vs. friend as discussed)
  2. Evidential certainty (there must be evidence of these parties)
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20
Q

Under the complete list test, will a fixed trust fail if a beneficiary is known to exist but cannot be traced?

A

No

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21
Q

What is required under the given postulant test for a discretionary trust?

A

Definition of class must be sufficiently clear to enable to the trustees to assess the potential range of beneficiaries and determine whether any given postulant (person) falls within the class

It is not necessary for the whole range of potential beneficiaries to be ascertainable.

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22
Q

Why will evidential uncertainty not cause a discretionary trust to fail?

A

Because a potential beneficiary who cannot prove they are within the class has no right to be considered by a trustee

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23
Q

Regarding objects, what will cause a discretionary trust to fail?

A

Where there are so many beneficiaries that the trust is administratively unworkable

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24
Q

What happens when a trust fails for uncertainty of objects?

A

A resulting trust in favour of the settlor or the settlor’s successors is presumed

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25
Q

Therefore to summarise, what happens to property in the case of failure of a trust for uncertainty of:

  1. Intention
  2. Subject matter
  3. Objects
A
  1. Intention: Property passes to person who would have been trustee
  2. Subject matter: Property reverts to settlor
  3. Objects: Resulting trust is presumed in favour of settlor or their successor’s
26
Q

Trustees

If a trustee refuses the appointment, resigns, or dies, in what circumstance will the court not appoint a replacement?

A

Where the settlor intended the trust to continue only as long as that particular trustee served

27
Q

Who may be a trustee?

A

Anyone with capacity to acquire and hold property for their own benefit, e.g. a private individual, a professional person, or a trust company, but not a minor

28
Q

What is the minimum and maximum number of trustees allowed?

A

Minimum of one. No limit on the maximum.

Differs from executors/administrators, for which there is no limit

A trust of land must have at least two and no more than four trustees.

29
Q

Why is it not advisable to appoint too many trustees?

A

Because trustees must act with unanimity

30
Q

How many trustees are required for a trust of land and why?

A

At least two trustees (or one if a trust corporation), because at least two trustees are required to give a valid receipt for money received on the sale of land

31
Q

What are the two rules against perpetuities?

A
  1. Remoteness of vesting rule
  2. Inalienability rule
32
Q

What does the remoteness of vesting rule provide?

A

An interest under a trust is void if it does not or will not vest within 125 years

33
Q

What does the inalienability rule provide?

A

In the exceptional case where a non-charitable purpose trust is valid, it is valid for either:

  1. 21 years or
  2. The rest of a living person’s life plus 21 years
34
Q

Where no perpetuity period is given in a non-charitable purpose trust, what is presumed?

A

That it is for no more than 21 years

35
Q

Intervivos Trusts

What is a declaration of trust?

A

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 and perpetuity

36
Q

What is the legal effect of a valid declaration of trust being made?

A

It cannot be revoked

37
Q

In addition to a declaration of trust, what is required for an inter vivos trust where a third party is acting as trustee?

A

The settlor must transfer the trust property in the appropriate legal fashion

38
Q

Are there any formal requirements for a declaration of trust of personal property?

A

No

39
Q

What is required for a declaration trust of land?

A

It must be evidenced in writing and signed by settlor

40
Q

Which is constitution?

A

The process of transferring legal title to property from one party to another

41
Q

On the exam where a settlor is setting up a trust of land with a third party as trustee, what should be distinguished?

A

The requirement for a signed writing to evidence the declaration of trust should be distinguished from the requirement for a deed registered at HMLR to make the transfer

42
Q

What is the impact of the maxim equity will not assist a volunteer on the process of setting up a trust with a third party as trustee?

A

If an individual attempts to make a gift of property to another but fails to transfer the legal title in the correct manner, equity will not normally enforce the gift

43
Q

Under the maxim equity will not assist a volunteer, what is a gift that is not legally transferred properly called, what does this mean, and what is the reason for this approach?

A

The gift is imperfect and fails, because the donee has paid no consideration and is asking the court to enforce a gratuitous promise

44
Q

What are the five exceptions to this rule that equity will not perfect an imperfect gift, which also apply to improperly constituted trusts?

A
  1. Every effort test
  2. Donatio mortis causa
  3. Fortuitous vesting rule in Strong v Bird
  4. Proprietary estoppel
  5. Unconscionable to change mind
45
Q

Under the every effort test, what must be done for equity to perfect an imperfect gift?

A

Donor/settlor has done everything required of them and has put the property outside their control.

Will not apply if they retain possession.

46
Q

What are the three requirements for a donatia mortis causa, i.e. gift by reason of death?

A
  1. Donor delivers property to donee while in objective contemplation of imminent or impending death
  2. Donor intends that the property be given to donee if donor dies, or returned if donor survives, and
  3. Donor does indeed die
47
Q

What triggers the fortuitous vesting rule in Strong v Bird with regard to (1) gifts and (2) trusts, and what is the effect of the rule?

A

Triggered by donor/settlor dying before transfer is made.

Transfer is complete in law and enforceable if

  • Gifts - Recipient becomes the donor’s personal representative
  • Trusts - Trustee becomes the settlor’s PR
48
Q

When does the fortuitous vesting rule in Strong v Bird not apply?

A

When there is evidence to suggest donor changed their mind before they died, by doing something inconsistent with the giving of a gift

49
Q

When may proprietary estoppel be available to a donee in relation to an incomplete gift?

A

Where they can prove a detriment due to their reliance on an assurance

50
Q

For proprietary estoppel, does an assurance need to be express?

A

No, it can occur in a situation when someone allows another to acquiesce in a belief

51
Q

What two things are required of the claimant’s reliance?

A
  1. Must be reasonable
  2. Must actually cause a detriment
52
Q

Testamentary trusts

What are the requirements for a testamentary trust, and why is there not a requirement to transfer the property?

When does the trust take effect?

A

It must remain revocable until death, and must be contained in a will duly executed under the Wills Act

The trust takes effect upon death

53
Q

What is the distinction between a fully secret testmentary trust and a half secret testmentary trust?

A

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

54
Q

What must a beneficiary do to enforce a fully secret trust?

A

Prove the terms by clear and convincing evidence

55
Q

Does the communication giving the nominated person the instructions regarding the fully secret trust need to be made before the will?

A

No, it can be made after

56
Q

When will a fully secret trust fail, and what happens to the property?

A

If the nominated person expressly refused to accept the trust, or did not know of the intended secret trust until after the testator’s death, there is no trust and the nominated person will take the property free of any trust

57
Q

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?

A

At or before the making of the will

58
Q

What must be true of the communication of a half secret trust?

A

It must not be inconsistent with the will itself

59
Q

Beneficial entitlement

What is a limited interest for a beneficiary, and what does it entitle them to?

A

Where they do not have an interest in the capital of the fund, they only have an interest in its income

60
Q

What is one thing a member of a class of beneficiaries of a discretionary trust has the right to do and one thing they do not have the right to do?

A

Any member has the right to see the trust enforced by asking trustees to exercise their discretion, however, they do not have the right to insist that discretion be exercised in their favour

61
Q

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?

A

All beneficiaries must:

  1. Together have an absolute interest in the property, i.e. an interest in the capital, and
  2. Be of full age and sound mind

SQE1 - Trusts (11 decks)

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