Constitution of Trusts and the rule in Milroy v Lord Flashcards
Which of the following is required for a trust to be validly constituted?
A) The settlor must retain control over the trust property.
B) The settlor must transfer legal title to the trustee.
C) The beneficiaries must sign a formal agreement.
D) The settlor must write a letter confirming their intention.
B) The settlor must transfer legal title to the trustee.
Explanation: For a trust to be properly constituted, the settlor must ensure that legal title to the trust property is transferred to the trustee using the correct formalities.
Which of the following best summarises the rule in Milroy v Lord (1862)?
A) A trust must always have three certainties.
B) Equity will perfect an imperfect gift.
C) Equity will not assist a volunteer by completing an incomplete transfer.
D) A trust is always valid even if the settlor fails to transfer legal title.
C) Equity will not assist a volunteer by completing an incomplete transfer.
Explanation: The rule in Milroy v Lord states that a failed gift or trust will not be perfected by equity. If legal title has not been properly transferred, the trust or gift fails.
What is the effect of an incompletely constituted trust?
A) The settlor remains the legal and beneficial owner of the property.
B) The trustee automatically assumes legal title.
C) The beneficiaries can claim the property immediately.
D) The court will enforce the trust regardless of legal title transfer.
A) The settlor remains the legal and beneficial owner of the property.
Explanation: If the trust is not properly constituted (i.e., legal title is not transferred), the property remains with the settlor.
John intends to give his nephew, Adam, a valuable painting as a gift. He writes a letter stating, “I give this painting to Adam,” but never delivers it to him. What is the legal position?
A) Adam has acquired full legal ownership of the painting.
B) The painting remains John’s property because legal title was not transferred.
C) Adam can enforce the gift in equity.
D) The court will consider this a declaration of trust.
B) The painting remains John’s property because legal title was not transferred.
Explanation: Under Milroy v Lord, the correct transfer formalities must be followed. Delivery is required for a gift of chattels, and since John never delivered the painting, the gift is invalid.
Sarah wants to gift her daughter, Emily, shares in a company. She fills in the correct transfer form but dies before sending it to the company registrar. What is the legal outcome?
A) The shares pass to Emily as a valid gift.
B) The shares are transferred under the rule in Strong v Bird.
C) The gift is incomplete, and the shares remain in Sarah’s estate.
D) Emily can rely on equity to complete the transfer.
C) The gift is incomplete, and the shares remain in Sarah’s estate.
Explanation: The transfer of shares requires registration with the company registrar. Since Sarah died before completing this, the gift fails.
Mark tells his brother, James, that he is holding £10,000 “on trust” for him but does not transfer legal title to a separate trust account. What is the legal position?
A) A valid express trust has been created.
B) The trust is not constituted because legal title has not been transferred.
C) James can claim the money as a volunteer.
D) Equity will step in to perfect the trust.
B) The trust is not constituted because legal title has not been transferred.
Explanation: A trust must be properly constituted by transferring legal title to the trustee. Without this, the trust does not exist.
Which of the following is an exception to the rule in Milroy v Lord?
A) Re Rose – where the donor has done everything in their power to transfer the title.
B) Jones v Lock – where an imperfect gift is treated as a self-declaration of trust.
C) Richards v Delbridge – where informal wording is sufficient to declare a trust.
D) Strong v Bird – where equity always perfects an imperfect gift.
A) Re Rose – where the donor has done everything in their power to transfer the title.
Explanation: In Re Rose, the court held that if the donor has done everything required to transfer legal title, equity will treat the transfer as effective.
Under the rule in Strong v Bird, when can an imperfect gift be perfected?
A) When the donee is a minor.
B) When the donor’s intention to make the gift continues until their death, and the donee is appointed as their executor.
C) When the court finds that the donor had clear intention to create a trust.
D) When the donee applies to the High Court for rectification.
B) When the donor’s intention to make the gift continues until their death, and the donee is appointed as their executor.
Explanation: In Strong v Bird, if the donee becomes the executor of the donor’s estate, the legal title automatically vests in them, perfecting the imperfect gift.
Which case confirmed that equity will not perfect an imperfect gift, even when a cheque is physically handed over?
A) Strong v Bird
B) Jones v Lock
C) Re Rose
D) Paul v Constance
B) Jones v Lock
Explanation: In Jones v Lock, a father gave his baby a cheque but did not endorse it. The court held that this was not a self-declaration of trust, and the gift failed.
Tom gifts a painting to Laura but asks to keep it in his house for safekeeping. What is the legal position?
A) Laura has full legal and beneficial ownership.
B) The gift is incomplete because legal title has not passed.
C) Tom is holding the painting on trust for Laura.
D) The court will imply a resulting trust for Tom.
B) The gift is incomplete because legal title has not passed.
Explanation: Delivery is required for a valid gift. Since Tom retains possession, the gift is not completed.
A settlor executes a declaration of trust over land but fails to transfer legal title to the trustee. What is the legal outcome?
A) The trust is valid under common law.
B) The trust is void as it is incompletely constituted.
C) The court will treat it as a gift.
D) Equity will assist a volunteer.
B) The trust is void as it is incompletely constituted.
Explanation: For a trust of land, a deed and registration are required under s52 LPA 1925. Without this, the trust fails.
Which of the following best describes the difference between an outright gift and a self-declaration of trust?
A) An outright gift involves the donor retaining obligations, whereas a trust does not.
B) A trust involves transferring both legal and beneficial title, whereas a gift does not.
C) A self-declaration of trust does not require a transfer of legal title, whereas a gift does.
D) Both require the transfer of legal title to be valid.
C) A self-declaration of trust does not require a transfer of legal title, whereas a gift does.
Explanation: In a self-declaration of trust, the settlor remains the legal owner and simply declares that they hold the property on trust. In contrast, a gift requires legal title to pass to the donee.
Which of the following is NOT a correct method of constituting a trust?
A) Transferring legal title to the trustee using the correct legal formalities.
B) The settlor making a verbal statement that they intend to create a trust.
C) The settlor declaring themselves as trustee of the property.
D) Executing a legally valid will containing trust provisions.
B) The settlor making a verbal statement that they intend to create a trust.
Explanation: A trust must satisfy the three certainties (intention, subject matter, and objects). While intention can sometimes be inferred, verbal statements alone are insufficient if formalities are not met.
Anna wants to transfer land to her best friend, Maria, as a gift. She tells Maria, “I give you my land,” and hands over the keys. However, no formal deed is executed. What is the legal outcome?
A) The gift is valid, as Maria has taken possession.
B) The gift is invalid, as a deed is required to transfer legal title to land.
C) Equity will complete the transfer under the principle in Re Rose.
D) The land is automatically held on trust for Maria.
B) The gift is invalid, as a deed is required to transfer legal title to land.
Explanation: Under s52(1) Law of Property Act 1925, the transfer of land must be made by deed and registered. Simply handing over the keys does not complete the transfer.
Brian signs a stock transfer form to transfer company shares to Lisa but forgets to send the form to the company registrar before his death. What is the legal position?
A) The shares pass to Lisa under the rule in Re Rose.
B) The transfer is incomplete, and the shares remain in Brian’s estate.
C) Lisa can claim ownership in equity.
D) The court will order specific performance to complete the transfer.
B) The transfer is incomplete, and the shares remain in Brian’s estate.
Explanation: Shares require registration to transfer legal title. Since Brian did not send the form to the registrar, legal title never transferred, and the shares remain in his estate.
