2. Express Trusts: Constitution of Trusts Flashcards
What are the requirements for an express trust to be enforceable?
Valid declaration of trust and putting assets into the trust.
What happens once both steps of constituting a trust are complete?
The trust is constituted and the settlor cannot change their mind.
What happens if a trust is not constituted?
No trust exists and the settlor remains the absolute owner.
What happens when the settlor declares themselves to be trustee?
The settlor has taken all steps necessary to create the trust.
What does the settlor own prior to the declaration of trust?
The settlor owns the relevant property absolutely, with both legal and equitable title.
What happens to the settlor’s title after the declaration of trust?
The settlor becomes the trustee and retains legal title.
What needs to happen for the trust to be constituted when the settlor declares themselves as trustee?
The settlor must make a valid declaration of trust.
What needs to happen for the trust to be constituted when a third party is appointed as trustee?
The settlor must make a valid declaration of trust and transfer legal title to the trustee.
What type of document is required to transfer legal title of land to a third party trustee?
A deed that satisfies the requirements of the Law of Property (Miscellaneous Provisions) Act 1989.
What are the requirements for a document to be considered a deed?
It must be stated to be a deed and signed by the person making the deed in the presence of a witness who also signs it.
What is Form TR1 used for?
To register land.
How is legal title transferred for land?
By registering the trustee as the new owner.
How can legal title in company shares be transferred?
Within or outside the CREST system.
What is CREST?
A computerized share transfer system.
How are shares in public companies transferred within CREST?
Electronically and instantaneously without paperwork.
Who manages shares in CREST?
A stockbroker.
What is required to transfer shares outside the CREST system?
Paperwork.
How is ownership of shares in private companies confirmed?
By the share certificate and the company’s register of members.
What is required to transfer private company shares to a trustee?
Execution of a stock transfer form and providing the share certificate.
Who registers the trustee as the new shareholder for private company shares?
The company’s secretary.
What is legal title?
Legal ownership of an asset.
When is legal title to money transferred?
Upon delivery or arrival in trustee’s account.
How is legal title to cash transferred?
Upon delivery to trustee.
How is legal title to electronically transferred money transferred?
Upon arrival in trustee’s bank account.
How is legal title to a cheque transferred?
Upon clearance of the cheque.
What is the general rule regarding a settlor who does not follow the rules in creating a trust?
Equity will not assist a volunteer.
Who is considered a volunteer in the context of a trust?
Someone who has not provided consideration for the transfer of property.
Why can’t equity assist a volunteer?
Because the transfer rules must be followed to constitute a trust.
What is the exception to the maxim ‘equity will not assist a volunteer’?
The ‘every effort’ test.
What is the ‘every effort’ test?
If the settlor has done everything they could to transfer legal title and put the property beyond recall, equity may consider the transfer complete.
What are the conditions of the ‘every effort’ test?
The settlor must have passed the point of no return, completed all required steps, and only the act of a third party remains for the transfer to be completed.
What is the rule in Strong v Bird?
Appointment of executors or administrators upon death
What happens when a person dies with a will?
Executors administer their estate
What happens when a person dies intestate?
Administrators administer their estate
What is legal title?
Ownership of assets acquired by executors or administrators
How do executors or administrators acquire legal title?
Through a grant of representation
Can a trustee also be an executor or administrator?
Yes, if they acquire legal title
What conditions must be satisfied for a trust to be constituted?
Intention to create a trust, failure to comply with transfer rules, settlor’s intention up to death, trustee acquiring legal title
What must a settlor do to declare themselves and a third party as trustees?
Transfer legal title into joint names
What transfer rules must be complied with for shares in a private company?
Signing a stock transfer form
Is there a distinction between a settlor being sole trustee or one of multiple trustees?
No, both cases would be unconscionable for the settlor to resile from the trust
What is the existence requirement for a trust?
Existence of the trust cannot be denied.
What must the settlor do to give effect to the trust?
Transfer the trust property in the names of all the trustees.
What happens if the settlor dies before transferring the property?
Executor/administrator must transfer the property to surviving trustees.
