Declarations of trust

Question 1

What is an express trust?

Answer 1

A trust that the settlor expressly intends to create

Question 2

What is a declaration of trust?

Answer 2

Instructions on how the trustees should run the trust and who will benefit from the trust.

Question 3

What is a fixed interest trust?

Answer 3

A type of express trust where the the trustees have no discretion as to how the trust property is to be distributed between the beneficiaries

Question 4

What if an express trust is silent on the shares?

Answer 4

It should be shared equally between the beneficiaries

Question 5

What is a discretionary trust?

Answer 5

An express trust which gives trustees discretion as to the amounts any person may receive and/or whether particular people receive anything at all.

Question 6

When is a declaration of trust valid?

Answer 6

Satisfy the three certainties

Satisfy the beneficiary principle

Comply with the perpetuity period

Question 7

What are the three certainties?

Answer 7

Certainty of intention

Certainty of subject-matter

Certainty of objects/beneficiaries

Question 8

How can a settlor ensure they have certainty of intention?

Answer 8

Use clear, mandatory wording that imposes a duty on someone to act as a trustee.

Not use precatory words such as wish, hope or expectation.

Question 9

What is the outcome if someone uses precatory wording in an express trust?

Answer 9

The settlor will be deemed to have made a gift and the person will be entitled to it absolutely.

Question 10

What is certainty of subject-matter?

Answer 10

The trust property must be described with certainty

The settlor must define the beneficiaries’ interests with certainty

Question 11

What is defined as ‘trust property’?

Answer 11

Most property falls into this definition, but future property is excluded as it only applies to property which the settlor currently owns.

Question 12

How can a settlor be clear about the subject-matter within a trust?

Answer 12

Use precise wording - e.g. ‘some of my silver’ does not indicate which silver is intended

Question 13

Can you create a trust over part of a collection of items?

Answer 13

For intangible property - Only if the items are absolutely identical.

For tangible property - only if the intended trust property is segregated from the other property.

Question 14

How do you ensure certainty of objects in a fixed interest trust?

Answer 14

Satisfy the complete list test.

Question 15

What is the complete list test?

Answer 15

A test to satisfy certainty of objects, where it may be possible to draw up a complete list of each and every beneficiary.

Question 16

How do you satisfy the certainty of objects where the beneficiaries are described as a class of people?

Answer 16

Conceptual certainty (i.e. language is clear and precise)

Evidential certainty (i.e. is there evidence to identify all the beneficiaries?)

Question 17

How do you ensure certainty of objects in a discretionary trust?

Answer 17

Satisfy the given postulant test

Question 18

What is the given postulant test?

Answer 18

A test to be satisfied for certainty of objects in a discretionary trust.

Conceptual certainty is required i.e. the description of the class needs to be clear and precise.

Question 19

What happens if a class of objects is excessively wide?

Answer 19

This is administratively unworkable and the trust will fail.

Question 20

What is capriciousness in a trust?

Answer 20

Where the purpose of a trust is useless, harmful, illegal or wasteful.

Question 21

What is a perpetuity period?

Answer 21

Where the law will only tolerate trusts that last for an acceptable period and abide by the perpetuity rules for each trust.

Question 22

What is the perpetuity period for trusts for individuals?

Answer 22

125 years (as of 1 April 2010)

Question 23

What are the formalities for a declaration of trust for a will?

Answer 23

It must comply with the Wills Act i.e. in writing and signed by the testator in the joint presence of two witnesses.

Question 24

What are the formalities for a declaration of trust for a lifetime trust?

Answer 24

No major formalities but it can be made orally, but writing is advised as the trustee can refer back to it.

Question 25

What are the formalities for a declaration of trust for land?

Answer 25

It must comply with the Law of Property Act - it must be in writing and signed by the settlor.