Certainty of Intention Flashcards
What is the key test for certainty of intention?
A) The settlor must explicitly use the word “trust”
B) The settlor’s words and conduct must objectively show an intent to create a trust
C) The settlor must write a formal legal document
D) The trustee must confirm they accept the role
B) The settlor’s words and conduct must objectively show an intent to create a trust
Explanation: Courts apply an objective test by examining the settlor’s words and actions to determine if a binding obligation was created.
Which of the following statements is LEAST likely to create a trust?
A) “I am holding these shares for my daughter until she turns 21”
B) “I trust my brother to use this money wisely”
C) “I wish my estate to be shared fairly among my family”
D) “I have placed these funds into a separate account for my nephew”
C) “I wish my estate to be shared fairly among my family”
Explanation: Vague expressions such as “wish” or “hope” are not legally binding and do not create a trust.
How do courts determine certainty of intention?
A) By considering the settlor’s subjective belief about trusts
B) By requiring all trusts to be created in writing
C) By allowing the trustee to determine if a trust exists
D) By applying an objective test to the settlor’s words and conduct
D) By applying an objective test to the settlor’s words and conduct
Explanation: The court assesses whether a reasonable person would conclude that the settlor intended to impose a trust obligation.
What is the effect of using the word “trust” in a document?
A) It is strong evidence but not conclusive of a trust
B) It automatically creates a valid trust
C) It prevents the court from applying an objective test
D) It gives the trustee complete discretion over the trust terms
A) It is strong evidence but not conclusive of a trust
Explanation: The presence of the word “trust” is useful but not determinative—what matters is whether there is a clear obligation.
A father tells his son, “I want you to take care of the house for the family.” The son later claims the house was left on trust for him and his siblings. What is the likely legal outcome?
A) A valid trust is created
B) No trust is created because the language is too vague
C) The son automatically becomes the sole legal owner
D) The court will modify the arrangement based on fairness
B) No trust is created because the language is too vague
Explanation: Vague or moral obligations (e.g., “I want you to take care of it”) do not create a trust.
A company receives advance payments from customers and places them into a separate account labeled “Customer Trust Account.” What is the likely outcome?
A) The funds are held on trust for the customers
B) The funds become part of the company’s assets
C) The company retains full ownership of the funds
D) The customers must prove that the company intended a trust
A) The funds are held on trust for the customers
Explanation: In Re Kayford Ltd (1975), a segregated account labeled as a trust account showed certainty of intention.
A man tells his partner, “This money is as much yours as mine,” regarding a shared bank account. When he dies, his partner claims the account was held on trust. What will the court likely decide?
A) The money passes to the deceased’s estate
B) The partner has a beneficial interest under a trust
C) The trustee must decide how the funds should be distributed
D) The court will declare the account a discretionary trust
B) The partner has a beneficial interest under a trust
Explanation: In Paul v Constance (1977), similar words and conduct were sufficient to establish certainty of intention.
A will states: “I leave my estate to my wife, trusting she will act fairly towards our children.” What will the court likely decide?
A) The wife holds the estate on trust for the children
B) The trust fails due to lack of certainty of intention
C) The children can claim a discretionary trust interest
D) The court will modify the will based on fairness
B) The trust fails due to lack of certainty of intention
Explanation: In Mussoorie Bank Ltd v Raynor (1882), similar wording was deemed too vague to create a binding trust.
A company receives deposits from customers and mixes them with its own funds, despite telling customers their money is “protected.” What will the court decide?
A) The customers are secured creditors
B) The funds are held on trust for the customers
C) The company’s actions automatically create a trust
D) The customers are unsecured creditors with no proprietary rights
D) The customers are unsecured creditors with no proprietary rights
Explanation: In Re Lehman Brothers (2009), failing to segregate trust assets meant customers had no proprietary rights.
A businessman writes, “I want some of my money to go to charity.” His family disputes whether a trust exists. What is the likely outcome?
A) The trust is valid and the court will appoint a trustee
B) The trust fails due to lack of certainty of subject matter
C) The court will enforce the trust as a charitable trust
D) The family must prove the businessman’s true intentions
B) The trust fails due to lack of certainty of subject matter
Explanation: “Some of my money” is too vague, meaning the trust lacks certainty of subject matter.
