Constitution of trusts Flashcards
How can an express lifetime trust be constituted?
The settlor appoints themselves as a trustee for the beneficiary
The settlor appoints someone else to be trustee by making a valid declaration of trust
What does the settlor need to do once they appoint themselves as a trustee?
The trustee must have legal title, but the settlor should already have this so no further action is needed.
What does a settlor need to do once they appoint a third party to be a trustee?
The settlor needs to take steps to put the legal title to the trust property in the hands of the other trustee
How does a settlor transfer property in land to a third party trustee?
(a) execute a deed that complies with the Law of Property Act (must be stated as a deed or signed as a deed and the person signing signs in the presence of a witness)
(b) give the deed to the Land Registry, or to the trustee to give to the Land Registry who will update legal title
How does a settlor transfer property in shares to a third party trustee?
(a) execute a stock transfer form
(b) pass the executed form with the relevant share certificate to the company directly.
When does a trustee have legal title of money passed from a settlor?
Cash, bank transfer and cheque
For cash - upon delivery.
For bank transfer - as soon as it is received in the trustee’s account.
For cheque - as soon as it clears.
How does a settlor transfer property of chattels to a third party trustee?
It must be physically passed to the trustee or by deed.
What does ‘equity will not assist a volunteer’ mean?
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.
What are the exceptions to the ‘equity will not assist a volunteer’ rule?
Every effort’ test
Strong v Bird rule
What is the ‘every effort’ test in respect of constitution of trusts?
When the settlor did everything they could to transfer the legal title but the transfer had not completed.
It must be ‘beyond the point of no return’ and all that remains is the act of a third party.
In respect of the every effort test, what is past the point of no return?
The property is still in their possession when they die and there should be no evidence to the contrary (will made afterwards).
What is the ‘Strong v Bird’ rule in respect of constitution of trusts?
If a settlor wanted to create a trust with someone acting as a trustee, but fails to transfer the legal title, and that same person is appointed as an executor or administrator, then a trust could be constituted.
What must a settlor do when they declare themselves and a thrid party to be trustees?
A settlor must take steps to transfer legal title from their sole name to the joint names of the settlor and other trustees.
What happens if a settlor does not transfer legal title in a case where they intend to be joint trustees?
If the transfer is not completed and a valid declaration is created, it would be unconscionable for the other person to back out of constituting the trust. It would therefore be valid in equity.
