Chapter 1- Express Trusts: Declaration of trust

Question 1

What is an express trust?

Answer 1

A trust that the settlor expressly intends to create.

Question 2

What must a settlor do for an express trust to be enforceable?

Answer 2

a) make a valid declaration of trust
b) put assets in the trust

Question 3

What is a declaration of trust?

Answer 3

The instruction manual on how trustees should run a trust and who will benefit from the trust.

Question 4

What must a valid declaration of trust do?

Answer 4

a) Identify the trustees
b) Identify the property that is to be held in the trust
c) Identify the beneficiaries
d) Identify the powers and duties that the trustees have in running the trust and administering trust property.

Question 5

What is a fixed interest trust?

Answer 5

Trustees have no discretion as to how the trust property into be distributed between the beneficiaries.
The settlor has made it clear who is to get how much.

Question 6

What is a discretionary trust?

Answer 6

Trustees are given a discretion as to the amounts beneficiaries receive.

Question 7

What case talks about the three certainties?

Answer 7

Knight v Knight

Question 8

What are the three certainties?

Answer 8

Certainty of Intention
Certainty of Subject Matter
Certainty of Objects

Question 9

What is Certainty of Intention?

Answer 9

It must be clear that the settlor intended to create a trust.

Question 10

What is Certainty of Subject Matter?

Answer 10

It must be clear what property is being held on trust and also what the individual interests of beneficiaries are .

Question 11

What is Certainty of Objects?

Answer 11

It must be clear who the beneficiaries are.

Question 12

What are precatory words?

Answer 12

They are a wish or an expectation. They are not binding. It is not obligatory.

Question 13

What if there is no certainty of intention?

Answer 13

If someone transfers property to another using precatory wording, then it is likely that that person will be deemed to have made a gift, not a trust.

Question 14

What are the two aspects of Certainty of Subject Matter?

Answer 14

a) the trust property must be described with certainty.
b) the settlor must define the beneficiaries’ interests with certainty.

Question 15

What is meant by trust property being certain (Subject Matter)

Answer 15

Trust property must be identifiable.
A trust can only be validly created over property that the settlor currently owns.

Question 16

What is meant by beneficial interests being certain (Subject Matter)

Answer 16

The trust will fail if the beneficiaries or interests in the trust fund are not defined with sufficient certainty.

Question 17

What if there is no certainty of Subject Matter?

Answer 17

No trust!!

Question 18

What is the test for certainty of objects in fixed interest trusts?

Answer 18

Complete List Test.
it must be possible to draw up a list of each and every beneficiary.

Question 19

What is needed if the beneficiaries are described as a class of people?

Answer 19

In order to satisfy the complete list test, we need:
Conceptual Certainty- is the description of the class clear and objective?
Evidential Certainty- is there evidence to identify all the beneficiaries that will benefit under the fixed interest trust?

Question 20

What is the test for certainty of objects with discretionary trusts?

Answer 20

The Given Postulant Test.
Can it be said with certainty whether any given postulant is or is not a member of the class of objects?
To satisfy the test, conceptual certainty is needed.
To ensure the trust property is being distributed to the right type of people.

Question 21

What is administrative unworkability?

Answer 21

Even if the class of people is clear, it must satisfy another test.
A discretionary trust will be administratively unworkable and invalid if the class is so hopelessly wide as to ‘not form anything like a class’. I.e being too large to survey.

Question 22

Does administrative unworkability effect fixed trusts?

Answer 22

No.

Question 23

Define Capriciousness.

Answer 23

A discretionary trust may be capricious if there is absolutely no rational reason for the trust or absolutely no rational basis on which the trustees can exercise their discretion to distribute trust property.

Question 24

What if there is no Certainty of Objects?

Answer 24

There will be a resulting trust in favour of the settlor.

Question 25

What is Remoteness of Vesting?

Answer 25

The perpetuity period as of 1 April 2010 is 125 years.