Creation of Trust Flashcards
Introduction to Trusts, Declaration of Trusts, Constitution of Trusts, Beneficial Entitlement, Charitable and Non-Charitable Purpose Trusts, Resulting Trusts, Trusts of the Family Home
What is equity?
A distinct system of English law developed separately from common law.
Equity aims to mitigate the rigors of common law and provides more flexible remedies.
What are the two main purposes of equity?
- To mitigate the rigors of common law
- To provide more options for redress beyond damages
Unlike common law, equity can offer various remedies.
What does property encompass?
Money, shares, land, personal possessions, etc.
Property can be held legally or equitably.
What is a trust?
An arrangement where one person holds property for the benefit of another.
The trustee must follow the terms set out by the settlor.
Who holds the legal title in a trust?
The trustee.
The trustee has the responsibility to manage the trust property.
Who holds the equitable title in a trust?
The beneficiary.
Beneficiaries enjoy the benefits of the trust property.
What are the responsibilities of a trustee?
- Manage the property
- Follow the terms of the trust
- Distribute as directed
- Make good any loss caused by breach of duty
Trustees must act in the best interests of the beneficiaries.
True or False: Beneficiaries have a proprietary right in a trust.
True.
Beneficiaries can enforce their rights against the trustee.
Fill in the blank: Trusts are often favored over ______ because they are more versatile and sophisticated.
gifts
Trusts provide structured management of assets compared to simple gifts.
What happens if a trustee wrongly gives trust property to someone?
The beneficiary can recover the property.
Beneficiaries have rights to reclaim mismanaged trust assets.
What are the 2 types of implied trusts?
Resulting and constructive
What is an implied trust?
A trust declared by a party not directly but by implication
An implied trust arises in circumstances where it is necessary for an inference to be drawn from the available admissible evidence that this was what the settlor intended
What is an express trust?
An express trust is created when a settlor or testator constitutes a trust with the express or inferred intention of creating a trust
What is a resulting trust?
When the settlor would have likely created a valid trust if they had thought about it more
What is a constructive trust
Implied in order to achieve a fair result between the parties
What is an express trust?
A trust that the settlor expressly intends to create.
The settlor must make a valid declaration of trust and put assets in the trust or in the hands of the trustee.
What must a settlor do to make an express trust enforceable?
Identify trustees, property, beneficiaries and put assets in the trust.
This includes making a valid declaration of trust.
What is a fixed interest trust?
Trustees have no discretion as to how to distribute trust property between beneficiaries.
Example: ‘I give £2100 to my trustees to hold on trust for my sister Rachel.’
What happens if a declaration is silent on beneficiary shares in a fixed interest trust?
It is presumed that beneficiaries will share equally.
This ensures fairness among beneficiaries.
What is a discretionary trust?
Gives the trustee discretion as to the amounts any person may receive and/or whether they receive anything at all.
This allows for flexibility in distribution.
What are the three certainties required for a valid declaration of trust?
Certainty of intention, certainty of subject matter, certainty of objects.
These certainties ensure clarity in trust arrangements.
What does certainty of intention require?
The settlor must use words that impose a duty on someone to act as a trustee for the benefit of someone else.
Precatory words do not create a trust; obligatory wording must be used.
True or False: The word ‘trust’ is necessary for certainty of intention.
False.
Obligatory or mandatory wording is required, not necessarily the word ‘trust.’
What is meant by precatory words in the context of certainty of intention?
Words expressing a wish, hope, or expectation that do not create a trust.
Using such language results in a gift rather than a trust.
