2 - Trust Creation

Question 1

2 ways a will creates a trust

Answer 1

A will can expressly create a trust or if a gift is made to a minor a trust will be created.

Question 2

3 examples of statutory trust

Answer 2

• Administration of Estates Act 1925 - Trust created for sale of an intestate’s estate;
• Law of Property Act 1925 - A legal estate held by 2 or more persons as joint tenants;
• Married Womens Property Act 1882 - Enables creation of a trust of a life policy.

Question 3

What is a secret trust?

Types and requirements.

Answer 3

A trust set up to protect the identity of the beneficiary.

It is an exception to the rule that a trust must be in writing.

Must be signed by testator and witnessed by 2 people.

Can be either fully secret (doesn’t appear in will) or half secret (terms not disclosed).

Question 4

How do you set up a secret trust?

Answer 4

Write a letter to the beneficiary your intention to leave assets subject to a secret trust under the terms of your will.

Can be done before or after the will.

All the terms and conditions must be clearly set out in the letter, but it can be sealed.

The beneficiary must understand and accept the obligation.

Question 5

What are the “three certainties”?

Answer 5

• Words - Must show a trust is intended;
• Subject - Property assets must be certain;
• Object - Beneficiaries must be certain (not vague, eg relative/friend).

From Knight vs Knight 1840

Question 6

What are the perpetuities and accumulations rules?

Answer 6

These are rules which limit the amount of time a trust can exist for (perpetuities) and the amount of time that income can be rolled up into the trust (accumulations).

Question 7

Perpetuities and Accumulations Act 2009

Which trusts does it apply to?

Implications

Answer 7

Only applies to trusts created after 6/4/10

Such trusts have a 125-year perpetuity period, although a deed can specify a shorter period.

There is no restriction on accumulation (can be whole of trust life), other than for charities where it is 21 years.

Question 8

Perpetuities and Accumulations Act 1964

Which trusts does this apply to?

Implications

Answer 8

Applies to all trusts created prior to 6/4/10.

Perpetuity periods either a specified persons lifetime + 21 years, or a fixed period of 80 years.

There are 6 potential accumulation periods which must be chosen from:

• Life of the settlor;
• 21 years from testator/settlor death;
• 21 years from disposition;
• Minority of any person(s) living at death of testator/settlor;
• Minority of any person(s) entitled under the trust;
• The minority of any person(s) in being at that date.