Constituting express trust Flashcards
Two methods for constituting an express trust
1) Settlor appoints themselves trustee for the beneficiary
2) The settlor appoints someone else to be the trustee
Settlor declares themselves to be trustee
If the settlor declares themselves trustee as long as they have complied with the rules of declaring the trust (3 certainties, beneficiary principle and rules against perpetuity) then they have done everything necessary to create the trust. They don’t need to transfer the property
Declaring someone else to be trustee
Settlor must make a valid declaration of trust (3 certainties, beneficiary principle and rules against perpetuity) then they must also transfer the property into the hands of the trustee
Property must be transferred in the correct way
Property must be transferred using method appropriate to that type of property
Property must be transferred in the correct way - Land or any legal interest in land
Transferor must execute a deed:
- The document is stated to be a deed or is stated to be signed as a deed
- The person making the deed signs the document in the presence of a witness who also signs it
Property must be transferred in the correct way - Shares in a company
- Transferor signs stock transfer form
- Transferor hands completed stock transfer form and share certificate to transferee
- Transferee sends both documents to the company to be registered
Property must be transferred in the correct way - Money
Transfer is effect by delivery of the note to the transferee
Property must be transferred in the correct way - Chattels
Transfer is the physical delivery of the asset to the transferee or by a deed
Defective transfers and role of equity - General rule
Equity will not assist a volunteer (the beneficiary). If the settlor has not properly followed the transfer rules relevant to the property that was going to be held on trust, there will be no trust
Defective transfers and role of equity - Exception - Every effort test
Where the settlor did everything they could to transfer the legal title, the transfer may be regarded as complete in equity. The settlor must have passed the point of no return or put the property beyond recall. The settlor must have completed all the steps they were required to take and waiting on a third party. Most common in land and shares
Defective transfers and role of equity - Exception - The rule in Strong v Bird
If the settlor wanted to create a trust with someone else acting as trustee but did not get round to transferring legal title during their lifetime, if the same person is then appointed as the executor or administrator if the conditions in Strong v Bird are satisfied a trust will be created
Defective transfers and role of equity - Exception - The rule in Strong v Bird - Conditions
1) The settlor intended to create an immediate trust with a third party acting as trustee
2) That trust was not immediately created due to a failure to comply with a relevant transfer rule
3) The settlor’s intention continued up to their death
3) The intended trustee acquired legal title to the trust property by becoming the settlor’s executor or administrator
