Creation of Express trusts

Question 1

What are the two different methods of creating trusts?

Answer 1

1) Self declaration of trust- the settlor becomes the trustee- they retain legal title, but beneficial ownership is transferred

2) transfer on trust- third party becomes trustee- legal title transferred to third party. Settlor ceases to have any interest. Beneficial ownership transferred to beneficiary

Question 2

How does a self declaration of trust work?

Answer 2

A settlor is the full legal owner- they then become the trustee (remain the legal owner) and the beneficial interest is passed to the beneficiary who becomes the equitable and beneficial owner.

Question 3

How does a transfer on trust for a third party work?

Answer 3

The settlor is the full legal owner. Title is then passed to a third party (trustee) who holds it on trust for the beneficiary. The settlor then has no interest in it

Question 4

How does a transfer on trust for a settlor work?

Answer 4

The Settlor passed title to the third party trustee, who holds it on trust for the beneficiary (who is the settlor). The Settlor passes the legal title to the trustee but retains the equitable interest.

Question 5

How is a trust created?

Answer 5

Series of requirements:
1) The three certainties (intention, subject matter and object)

2) beneficiary principal- need for a trust to be enforceable- has to be beneficiary’s to hold the trustees to account- beneficiary has to be a legal person. Limited exceptions are charitable trusts.

3) Perpetuity rules- these limit the time it can be held on trust.