2. Express Trusts: Constitution of Trusts

Question 1

What are the requirements for an express trust to be enforceable?

Answer 1

Valid declaration of trust and putting assets into the trust.

Question 2

What happens once both steps of constituting a trust are complete?

Answer 2

The trust is constituted and the settlor cannot change their mind.

Question 3

What happens if a trust is not constituted?

Answer 3

No trust exists and the settlor remains the absolute owner.

Question 4

What happens when the settlor declares themselves to be trustee?

Answer 4

The settlor has taken all steps necessary to create the trust.

Question 5

What does the settlor own prior to the declaration of trust?

Answer 5

The settlor owns the relevant property absolutely, with both legal and equitable title.

Question 6

What happens to the settlor’s title after the declaration of trust?

Answer 6

The settlor becomes the trustee and retains legal title.

Question 7

What needs to happen for the trust to be constituted when the settlor declares themselves as trustee?

Answer 7

The settlor must make a valid declaration of trust.

Question 8

What needs to happen for the trust to be constituted when a third party is appointed as trustee?

Answer 8

The settlor must make a valid declaration of trust and transfer legal title to the trustee.

Question 9

What type of document is required to transfer legal title of land to a third party trustee?

Answer 9

A deed that satisfies the requirements of the Law of Property (Miscellaneous Provisions) Act 1989.

Question 10

What are the requirements for a document to be considered a deed?

Answer 10

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.

Question 11

What is Form TR1 used for?

Answer 11

To register land.

Question 12

How is legal title transferred for land?

Answer 12

By registering the trustee as the new owner.

Question 13

How can legal title in company shares be transferred?

Answer 13

Within or outside the CREST system.

Question 14

What is CREST?

Answer 14

A computerized share transfer system.

Question 15

How are shares in public companies transferred within CREST?

Answer 15

Electronically and instantaneously without paperwork.

Question 16

Who manages shares in CREST?

Answer 16

A stockbroker.

Question 17

What is required to transfer shares outside the CREST system?

Answer 17

Paperwork.

Question 18

How is ownership of shares in private companies confirmed?

Answer 18

By the share certificate and the company’s register of members.

Question 19

What is required to transfer private company shares to a trustee?

Answer 19

Execution of a stock transfer form and providing the share certificate.

Question 20

Who registers the trustee as the new shareholder for private company shares?

Answer 20

The company’s secretary.

Question 21

What is legal title?

Answer 21

Legal ownership of an asset.

Question 22

When is legal title to money transferred?

Answer 22

Upon delivery or arrival in trustee’s account.

Question 23

How is legal title to cash transferred?

Answer 23

Upon delivery to trustee.

Question 24

How is legal title to electronically transferred money transferred?

Answer 24

Upon arrival in trustee’s bank account.

Question 25

How is legal title to a cheque transferred?

Answer 25

Upon clearance of the cheque.

Question 26

What is the general rule regarding a settlor who does not follow the rules in creating a trust?

Answer 26

Equity will not assist a volunteer.

Question 27

Who is considered a volunteer in the context of a trust?

Answer 27

Someone who has not provided consideration for the transfer of property.

Question 28

Why can't equity assist a volunteer?

Answer 28

Because the transfer rules must be followed to constitute a trust.

Question 29

What is the exception to the maxim 'equity will not assist a volunteer'?

Answer 29

The 'every effort' test.

Question 30

What is the 'every effort' test?

Answer 30

If the settlor has done everything they could to transfer legal title and put the property beyond recall, equity may consider the transfer complete.

Question 31

What are the conditions of the 'every effort' test?

Answer 31

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.

Question 32

What is the rule in Strong v Bird?

Answer 32

Appointment of executors or administrators upon death

Question 33

What happens when a person dies with a will?

Answer 33

Executors administer their estate

Question 34

What happens when a person dies intestate?

Answer 34

Administrators administer their estate

Question 35

What is legal title?

Answer 35

Ownership of assets acquired by executors or administrators

Question 36

How do executors or administrators acquire legal title?

Answer 36

Through a grant of representation

Question 37

Can a trustee also be an executor or administrator?

Answer 37

Yes, if they acquire legal title

Question 38

What conditions must be satisfied for a trust to be constituted?

Answer 38

Intention to create a trust, failure to comply with transfer rules, settlor's intention up to death, trustee acquiring legal title

Question 39

What must a settlor do to declare themselves and a third party as trustees?

Answer 39

Transfer legal title into joint names

Question 40

What transfer rules must be complied with for shares in a private company?

Answer 40

Signing a stock transfer form

Question 41

Is there a distinction between a settlor being sole trustee or one of multiple trustees?

Answer 41

No, both cases would be unconscionable for the settlor to resile from the trust

Question 42

What is the existence requirement for a trust?

Answer 42

Existence of the trust cannot be denied.

Question 43

What must the settlor do to give effect to the trust?

Answer 43

Transfer the trust property in the names of all the trustees.

Question 44

What happens if the settlor dies before transferring the property?

Answer 44

Executor/administrator must transfer the property to surviving trustees.