Ch 02 - Express Trusts - Constitution of Trusts Flashcards
What are the two main requirements for a trust to be valid?
A trust must have both a valid declaration of trust and be properly constituted.
What does the constitution of a trust require?
The constitution of a trust requires that legal title to the trust property is transferred to the trustee.
What happens if the settlor and trustee are the same person in a trust?
If the settlor and trustee are the same person, the trust is automatically constituted once the declaration of trust is valid, as legal title is already in the hands of the trustee.
What is required when the settlor and trustee are different people?
The settlor must take steps to transfer legal title to the trustee, depending on the type of property involved.
What steps are required for a trust involving land?
The settlor must execute a deed and, in the case of registered land, register the trustee with the Land Registry.
What steps are required for a trust involving private company shares?
The settlor must execute a stock transfer form and send it to the trustee or the company secretary for registration.
What must a settlor do for a trust involving chattels (e.g., furniture, art)?
The settlor must deliver the chattels to the trustee or execute a deed in favor of the trustee.
What happens if the settlor fails to follow the necessary steps to transfer legal title?
If the necessary steps are not followed, the trust will not be created, as equity follows the maxim “equity will not assist a volunteer.”
What is the “Every Effort Test” in trust constitution?
The “Every Effort Test” states that if the settlor has done everything they could to transfer legal title but couldn’t complete the transfer, equity may treat the trust as valid.
When does the “Every Effort Test” become relevant?
It is relevant when the settlor intends a lifetime trust, but their will passes the property to someone else. If the settlor has satisfied the test, the property goes to the intended trust beneficiary.
What happens if the settlor has not satisfied the “Every Effort Test”?
If the settlor hasn’t satisfied the test, the property will go to the people who inherit under the will or intestacy.
What is the rule in Strong and Bird and how does it apply to trust constitution?
The rule allows equity to affect a lifetime trust when the trustee is also the settlor’s personal representative. The trustee can receive legal title after the settlor’s death, perfecting the trust in equity.
When is the rule in Strong and Bird relevant?
It’s relevant when the settlor didn’t transfer legal title during their lifetime, but the trustee is also the executor of the settlor’s will.
What happens if the settlor names joint trustees, including another person besides themselves?
If the settlor names joint trustees, equity may intervene to constitute the trust, even if the settlor doesn’t transfer title to the joint trustees.
What are the key takeaways for creating express trusts?
An express trust must be properly declared and properly constituted. Always check if the trustee is also the personal representative of the settlor, as equity may intervene under the Strong and Bird rule.
