Creation of Trusts

Question 1

General

Answer 1

Trusts may be created by will, statute, court order or in secret.
Express trusts are created in writing, by deed or by will expressly setting out the trust property, trustees, beneficiaries and trust powers

Question 2

Creation of Trust by Execution of Deed

Answer 2

This is the most common method. The deed should contain

a) specify the trust property
b) name the trustees and beneficiaries
c) set out the powers of the trustees
d) set out the rights of the beneficiaries
e) where appropriate fulfill the normal requirements of a deed of assignment. The deed has to be signed and witnessed by the settlor, the trustees and witnesses independent of the trust parties to show their acceptance of that position

Trusts can be created over life policies from the outset of the policy. In such cases they are commonly made by completing the life offices trust forms requesting the life company to issue the policy under trust and setting out the terms of the trust in the same document.

Question 3

Creation of Trust by Will

Answer 3

• A trust can be created by a Will.
• The trust may be expressly stated in the Will or arise because the will leaves a gift to a minor.
• The executors of the will are also effectively the trustees when they administer the assets of the estate for the beneficaries set out in the will.
• If any beneficiaries are minor the executors must hold the property as trustees until the beneficiary reaches 18. In practice wills tend to give express power to the executors to pay such property to the guardian or parent of a minor.
• A will can set up a specific type of trust, which could incvolve a life interest trust (known as Immediate Post Death Interest IPDI since 22 March 2016 or a discretionary trust).
• Historically discretionary trusts were commonly included in wills for IHT reasons, however with the introduction of the transferrable NRB, the IHT advantages of discretionary trusts has diminished.
• A trust set up by will does not come into force immediately, but only after the testator has died and only if the will has not been revoked before death.
• The trust will not receive the assets until executors have finished the administration of the estate.
• Until then the trustees merely have a Chose In Action to ensure that estate is property administered.
• A testator can revoke a will, therefore they could revoke a will trust at anytime before death by physically destroying it or executing a new will that includes a clause revoking any previous Wills.
• Wills are also revoked on marriage unless expressly made in contemplation of marriage.
• trusts can arise when a person dies without leaving a will, i.e. a statutory trust for minors when a person dies intestate.