Declaration of Trust

Question 1

Difference between evidential certainty and conceptual certainty?

Answer 1

Evidential certainty: a beneficiary can prove that he/she is one of a class of beneficiaries.

Conceptual certainty: words used by the settlor to describe the beneficiaries are clear.

Question 2

Formality requirements for a trust of land AND transfer requirements:

Answer 2

Compliance with s.53(1)(b) of the Law of Property Act 1925:
The declaration of trust must be evidenced in signed writing.

Transfer:
Transfer of legal estates and interests in land must be created by deed, the transfer is completed when it is registered at the Land Registry. Legal title passes.

Question 3

Three certainties:

Answer 3

1. Certainty of intention
2. Certainty of subject matter
3. Certainty of objects - conceptual certainty and evidential certainty relate to certainty of objects

Question 4

The rule in Strong v Bird:

Answer 4

Operates as an exception to the rule that ‘equity will not assist a volunteer’:

Intention to create an immediate trust;
The trust was not immediately created due to a failure to comply with a relevant transfer rule;
Nothing to suggest that the donor’s intention did not continue up until date of death;
Intended donee becomes executor under donor’s will.

Question 5

A trust will be constituted where the settlor has done everything in his power to divest the trust property (Re Rose). The “every effort” test.

Requirements:

Answer 5

The correct method of transfer is used;
The transferor has done everything in their power to effect the transfer; and
The documentation ends up in the hands of the person/organisation capable of effecting the transfer.

Question 6

A settlor wants to create a trust for her children before the end of the tax year. She wants her husband and solicitor to act as trustees. The trust property will comprise her company shares.

What steps must the settlor take to create a valid trust?

Answer 6

The settlor must hand the share certificates and a signed stock transfer form to the trustees, and make a declaration of trust which can be oral or written.

Question 7

A settlor wants her neighbour to be a trustee of her holiday cottage for the benefit of her neighbour’s child.

What are the steps that the settlor must take to create a valid trust?

Answer 7

The settlor must:
Declare the trust, the declaration of which should be evidenced in signed writing to comply with s53(1)(b); and
Must constitute the trust by executing a transfer deed and handing this to her neighbour.

Question 8

The rule in Re Rose was extended in T Choithram:

Answer 8

Held that a valid trust was created over the property even though the deceased person had NOT transferred the legal title in the trust property to the trustees. To do otherwise, would be unconscionable and contrary to the principles of equity.

Applies to valid declaration of a trust in a letter - it would be unconscionable to back out of constituting the trust.

Question 9

Re Rose vs Strong v Bird:

Answer 9

Re Rose - the “every effort” test. The donor parts with documents beyond recall.

Strong v Bird - a gift is made to a truste who subsequently obtains legal title to it by becoming the donor’s PR.

Question 10

Administrative unworkability vs. Evidential uncertainty:

Answer 10

Administrative unworkability: the definition of the beneficiaries is too wide to form a class e.g. a gift for “all residents of Greater London”

Evidential certainty- must be possible to draw up a complete list of all the potential beneficiaries.

Question 11

Conceptual certainty vs. Evidential certainty

Answer 11

Conceptual certainty: description of the beneficiaries e.g. ‘relatives’, ‘family’, ‘dependants’.

Evidential certainty: identification of beneficiaries.

Question 12

Re Rose - the every effort test. Key question: has the donor put the document beyond recall?

Answer 12

If the donor is still in possession of the document, this suggests that the every effort test has NOT been met.

Question 13

How do you validly constitute a trust of chattel?

Answer 13

A clear, unambiguous and unequivocal intention of the owner to transfer the property title the recipient;
Accompanied by something which constitutes an act of delivery/change of possession.

Must be physical delivery to the trustee or a deed.

Question 14

Precatory words. The use of precatory words will generally NOT create a trust unless it is clear from the whole context that the testator intended to create a trust:

Answer 14

e.g. ‘I wish’, ‘I hope’, ‘in case you want to give some’

Question 15

Formalities to create trusts vs. Constitution:

Answer 15

There is an important distinction between the formalities to declare a valid trust AND the actual transfer of the trust assets into the trust (constitution).

Following constitution of the trust, the equitable rights are established AND the trust becomes enforceable by the beneficiaries.

Question 16

Describe the maxim ‘equity will not perfect an imperfect gift’:

Answer 16

Without a transfer of trust assets to the trustees, the trust will NOT be constituted and title in the assets will NOT have transferred because equity will not perfect an imperfect gift.

Question 17

Describe the maxim equity will not assist a volunteer:

Answer 17

A volunteer cannot rely on the law to give rise to a trust where one has not been properly constituted, or for the title to transfer. As a volunteer, no consideration has been paid, so there is nothing to enforce.

Question 18

Requirements for a donatio mortis casa (DMC):

Answer 18

The gift was made in contemplation of, and conditional on, the death of the owner.
The gift is conditional upon the donor’s death.
The subject matter of the gift must be delivered to the trustee and the property must be capable of passing by DMC.

Question 19

What is a secret trust?

Answer 19

The general rule is that for a trust to take effect on death it must be declared in a valid will. However, where the testator tells an apparent beneficiary that he is to hold a gift in a will on trust and the beneficiary agrees, a valid secret trust arises and the apparent beneficiary is bound.