Express Trust - Constitution of Trust Flashcards
What are the two broad elements needed for a valid express trust?
Declaration and constitution of trust
What does constitution of trust mean?
Legal title of the trust property is put into the hands of the trustee
What happens where a settlor declares themselves a sole trustee?
If declaration valid, trust constitutes as they have legal title already
What happens where a settlor declares themselves one of multiple trustees?
Likely that the trust will be constituted in equity, even if settlor doesn’t take steps to transfer legal title into joint names of other trustees
Equity intervenes, as it would be unconscionable for the settlor trustee to back out
What happens where the settlor and trustee are different people?
Settlor must take steps to transfer legal title to trustee
How is land properly transferred?
The settlor must execute a deed
Registered land - Form TR1 completed (this is a deed), given to trustee and Land Registry, who must re-register it and make the trustee the new legal owner
How are private company shares properly transferred?
The settlor must execute a stock transfer form, give this and a share certificate to the trustee or company secretary and they must register the trustee as the new legal owner
How are chattels properly transferred?
The settlor must deliver these to the trustee or execute a deed in favour of the trustee
How are cash, bank transfers and cheques properly transferred?
Legal title passes when cash is delivered, money lands in trustee account or cheque clears
What are the consequences of failing to transfer property correctly?
Trust is void, subject to two exceptions
Explain the ‘every effort’ test exception?
Where the settlor has put the documents beyond recall, but the transfer hasn’t yet legally occurred, equity perfects the trust
Documents must have left the settlor’s possession + someone else has failed to play their part (take TR1 to Land Registry for example)
Example of application of ‘every effort’ test
The settlor names beneficiaries in a will but also wants to make a lifetime trust in favour of another person:
- If settlor satisfies every effort test, it will go to the intended beneficiaries in the trust
- If not satisfied, the property will go to those who stand to inherit under the will
Explain the ‘Strong v Bird’ exception
Equity can perfect a lifetime trust where the trustee (X) also becomes the settlor’s personal representative on settlor’s death - appointed by will for example
Requirements:
* Settlor intended to create an immediate trust with X acting as trustee – not properly constituted during their lifetime
- Trust not created during lifetime, due to failure to transfer legal title correctly
- Intention continued up to the settlor’s death
- Intended trustee becomes the settlor’s personal representative – this gives them legal title over settlor’s estate
