2. Express Trusts: Constitution of Trusts Flashcards
What must occur for a trust to be ‘constituted’
The settlor has:
(1) Made a valid declaration of trust
(2) put assets into the trust
Two methods for constituting an express lifetime trust:
(1) Settlor appoints themselves as trustee w valid declaration
(2) settlor appoints someone to be a trustee with a valid declaration - and transfers legal title of the property to them
How to constitute a trust where in the settlor is the trustee?
So long as valid declaration has been made, the trust is treated as constituted because the settlor (as trustee) already holds the legal title to the property
How does a settlor validly transfer land to a trustee?
(a) execute a DEED (stated to be a deed or is stated to be signed as a deed)
- Deed-maker signs it infront of witness who also signs
- REGISTERED LAND: Form TR1 is used (satisfies the above)
(b) give executed deed to trustee (to send to Land Registry) OR send to Land Registry
(c) land registry registers trustee as new owner
How does a settlor validly transfer company shares to a trustee?
(1) within CREST system - certain shares in public quoted companies
(2) outside CREST system - all other shares (esp private companies)
DEF: CREST
- Computerised share transfer system
- shares can be transferred electronically without paperwork
- managed by stockbroker (settlor would need to instruct stockbroker)
How are shares transferred outside of the CREST system
(1) settlor executes stock transfer form
(2) give form and relevant share certificate to trustee (to send to the company) or directly to the company
(3) company secretary registers trustee as new owner in register of members
How does a settlor validly transfer money to trustees to be held on trust?
- Money passes with delivery
i. physical delivery of cash
ii. electronic bank transfer (once it arrives in account)
iii. cheque (legal title passes once cheque is cleared)
What happens if a settlor writes a cheque to a trustee for monies to be held on trust, but dies before the cheque clears?
The cheque can no longer be cashed
How does a settlor validly transfer chattels to trustees to be held on trust?
Either physical delivery or by deed
Meaning of ‘equity will not assist a volunteer’
It follows that the transfer rules cannot be ‘bent’ or overlooked in order to constitute a trust. If
the settlor has not properly followed the transfer rules relevant to the property that was going
to be held on trust, there will be no trust – equity cannot help, because equity will not assist a
volunteer (the beneficiary)
Exceptions to ‘equity will not assist a volunteer’
(1) every effort test
(2) the rule in Strong v Bird
DEF: The ‘every effort’ test
- settlor has ‘passed the point of no return’ in transferring property (beyond recall)
- taking all steps required of them
- waiting for third party to complete transfer (ie. registering trustee as new owner of shares)
How to transfer property to trustees when the settlor AND a third party are trustees:
Settlor must transfer property from sole-name to the joint names of the trustees (taking same steps as above)
Settlor + Third Party are trustees: Transfer does not take place and settlor dies
Trust will be valid in equity - trustee (settlor) was duty bound to transfer the property
