Chapter 2: Formalities for creation of a trust Flashcards
what are the requirements for an inter vivos trust of personalty?
No special formalities required to create a trust.
what are the requirements to create an inter vivos trust over realty?
Evidenced in writing
Signed by settlor
Oral - date fo oral declaration
Unenforceable if not copied with
what happens if the conditions of a trust over land are not met?
unenforceable - beneficiary is not entitled to property.
resulting trust created back to settlor
when is a testamentary trust valid?
Compliance with s9 Wills Act formalities.
what are the requirements for a transfer of equitable interest?
Subsisting equitable interest
Legal and equitable ownership separated
In writing
No compliance = void
S
ignature by agent is ok if given authorisation.
what is subsisting equitable interest?
equitable interest already separated from the legal title (already trustee and beneficiary = an existing trust).
when/ how does subsisting equitable interest occur?
On the creation of a trust legal and equitable title automatically split.
what are the 4 methods to dispose of equitable interest?
Assign to third party directly
Direct the trustees to hold the property for a third party
Contract for valuable consideration to assign equitable interest
Declare a trustee (subtrust)
when is there a valid assigning of equitable interest to a third party directly?
subsisting equitable interest
compliance with formalities s53(c)
what is the effect of successful assigning equitable trust directly?
Trustee holds on trust for the new beneficiary of the equitable title
What are the requirements for a valid disposition of equitable interest for a trustee to hold property for a third party?
Beneficiary of a bare trust
Directed Trustee
Compliance with formalities
what is a bare trust?
Adult beneficiary has an absolute right to the assets including income generated by the assets.
Trustee has no say in distribution of the assets
Beneficiary can instruct trustee on what to do with the assets.
when will a disposition fail when the beneficiary directs trustees to transfer trust property to another?
when the legal and equitable title merge (new beneficiary becomes the absolute owner)
what will not exempt S53(c) formalities?
entering into a valid oral contract with consideration WILL NOT exempt s53(1)(c) for the disposition of equitable interest shares.
What are the steps to determine successful transfer of equitable interest?
Step 1 - did the equitable (beneficial interest) move from one person to another?
Step 2 - Yes - void unless all formalities have been met in s53c
what is a life interest?
a beneficial interest that only lasts during the lifetime of the beneficiary.
NOT entitled to the property. ONLY entitled to income generated by the property
(If the property is land - enjoy the land during their lifetime)
what is remainder interest?
beneficial interest that follows a life interest. Only entitled to take ownership once the life interest has ended (someone died).
when will declaring a sub- trust succeed in transferring the equitable interest?
complies with s53(c)
subsisting equitable interest
beneficiary is considered to assign interest to a third party and the trustee holds on trust for the new beneficiary
when will a sub-trust be genuine?
Q of fact for the court
duties carried out as trustee?
what are the other ways of disposing equitable interest?
Beneficiary disclaims equitable interest (no S53(1)(c)
Nominations under a pension fund / insurance policy
when does s53 1 not apply?
resulting and constructive trusts
