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(FLK2) Equity and Trusts > Express Trust Creation > Flashcards

Express Trust Creation Flashcards

1
Q

What is a Trust?

A

An Equitable Duty relating to Property:

  • The Trustee bears the Duty.
  • The Object is to whom the Duty is owed.
  • The Property under the Trust is called the Trust Property.
  • The Trustee has the Legal Title in the Trust Property.
  • The Object has the Equitable Title in the Trust Property.
  • The essence of the Trustee’s Duty is to hold or apply the Trust Property for the Object’s benefit.
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2
Q

What are the Three Certainties?

A
  • Certainty of Intention.
  • Certainty of Subject Matter.
  • Certainty of Object.
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3
Q

What is the Certainty of Intention?

A
  • An Intention to impose or assume;
  • A Duty to hold or apply Property for another’s benefit.
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4
Q

How is the Certainty of Intention ascertained?

A
  • The Settlor’s words or conduct, assessed Objectively.
  • It is irrelevant whether the Settlor subjectively intended to create a Trust.
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5
Q

How is the Certainty of Intention ascertained in a Written Document?

A

By observing the Document’s language, by reference to:

  • Common sense.
  • The Document’s totality.
  • The words’ natural meanings.
  • The facts known, or assumed to be known, by the Author(s) when the Document was drafted.

The use of the word ‘Trust’ and the Trust-like treatment of Assets are not determinative in and of themselves, but are good evidence.

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6
Q

How can the Certainties of Object and Subject influence the Finding of the Certainty of Intention?

A
  • The more vague the Certainties of Object and Subject;
  • The more difficult the Certainty of Intention become to establish.
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7
Q

What is the Certainty of Subject Matter?

A
  • The Trust Property Requirement: The Trust must clearly identify the Trust Property.
  • The Beneficial Entitlement Requirement: The Trust must clearly outline the Object’s interest thereunder.
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8
Q

Regarding Certainty of Subject Matter, what are the Nuances of specifying a Number of Items from Larger Mass?

A

Quantity-Based:

  • Specifying a Quantity is problematic if it does not specify precisely which items are the Subject Matter.
  • Accordingly, the Settlor should clearly demarcate exactly which Items are the Subject Matter.
    • This is true if the Items are Tangible or Non-Fungible; however
    • This is untrue if the Items are Intangible and Fungible.

Pecentage-Based:

  • Specifying a Percentage is unproblematic because it specifies a proportion of the Mass as the Subject Matter.
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9
Q

What is the Certainty of Objects?

A

The need to clearly identify for whom or what the Trust Property is being held or applied.

This also applies to Powers of Appointment within a Trust.

Most often, the Object will be a Beneficiary, although this is not necessarily true, as is the case with Purpose Trusts.

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10
Q

What is the Test for Certainty of Objects in Fixed Trusts?

A
  • It must be possible to compile a complete list of all Objects at Creation. Absolute Certainty is required.
  • If this threshold is not met, the Trust fails wholly or partly.

This is called the “Complete List Test”.

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11
Q

What is the Test for Certainty of Objects in Discretionary Trusts?

A
  • It must be possible to determine with Certainty whether any given Individual is, or is not, an Object.
    • The Class cannot be so wide as to be administratively unworkable.
    • If possible, it is a Claimant to prove to the Trust that they fall within a Class.
  • If this threshold is not met, the Trust fails wholly or partly.

This is called the “Is or Is Not Test”.

Accordingly, this necessitates a clear set of rules regarding who or what may qualify.

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12
Q

When will a Trust automatically Cease to Exist?

A

When the Subject is destroyed or consumer through no fault whatsoever of the Trustee.

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13
Q

What is the Rule Against Remoteness of Vesting?

A
  • Subjects must Vest within 125 years of Creation (the “Statutory Perpetuity Period”).
  • Interests that do not Vest within the Statutory Perpetuity Period are Void.
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14
Q

Regarding the Rule Against Remoteness of Vesting, what is the Wait-and-See Rule?

A

A Trust may subsist until it becomes clear the given Interest cannot Vest within the Perpetuity Period.

Accordingly, every Trust has 125 years to arrange Vesting.

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15
Q

Regarding the Rule Against Remoteness of Vesting, what is the Class Closing Rule?

A

An Object can be excluded if its inclusion would violate the Rule Against Remoteness of Vesting.

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16
Q

What is the Rule Against Inalienability?

A
  • Subjects must Vest within:
    • The duration of a Specified Period of Life, plus 21 years; or
    • Absent a Specified Period of Life, then just 21 years (the “Common Law Perpetuity Period”).
  • This only applies to Non-Charitable Purpose Trusts.
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17
Q

Does the Wait-and-See Rule apply to the Rule Against Inalienability?

A
  • No. Consequently, the Trust must clearly state that it ends within the Common Law Perpetuity Period.
    • This is called an Express Perpetuity Clause.
  • Failure to do so renders the Trust Void.
18
Q

What are the Formalities for the Creation of a Trust of Land?

A
  • The Trust must be Evidenced, but not necessarily Declared, in Writing. It is Unenforceable until then.
  • The Document has no prescribed form, but it must show:
    • The Trust’s terms; and
    • The Settlor’s Intention to Declare.
  • The Document must be signed by either the Settlor or Trustee, preferably the former.

A Trust Declared by Valid Will automatically satisfies all of these requistes.

19
Q

What is Constitution?

A
  • The Irrevocable Transfer of Legal Title in the Trust Property from the Settlor to the Trustee.

This also applies to Gifts.

20
Q

What is the Effect of Constitution?

A
  • The Settlor relinquishes Title in the Trust Property.
  • The Trustee gains Legal Title in the Trust Property.
  • The Object gains Equitable Title in the Trust Property.

This also applies to Gifts.

21
Q

What is the Effect of Failing to Constitute?

This is called the Rule in Milroy v Lord.

A

The Trust is Void.

This also applies to Gifts.

22
Q

What are the Exceptions to the Rule in Milroy v Lord?

A
  • Fortuitous Vesting.
  • The Principle in Re Rose.
  • Donationes Mortis Causa.
  • The Unconscionable Principle.
23
Q

What is the Exception of Fortuitous Vesting?

A

Prerequisites:

  • The Donor Intends to make an Immediate Gift.
  • The Donor’s Intention persists until Death.
  • The Intended Donee becomes a Personal Representative of the Donor’s Estate.

Consequences:

  • The Imperfect Gift is Cured.
24
Q

What is the Exception of the Principle in Re Rose?

A

Prerequistes:

  • The Transferor does everything in its power to Transfer Legal Title, which entails:
    • Putting the matter beyond its control.
    • Using the correct legal methods of transfer.
    • Delivering all necessary Documents to whomever can effect Transfer or the Transferee.

Consequence:

  • From the point when all Prerequisites are met;
  • The Transferor irreversibly holds Legal Title on Constructive Trust for;
  • The Transferee or intended Beneficiaries, whom now hold Equitable Title in the Property.
25
Q

What is the Exception of Donationes Mortis Causa?

A

Prerequistes:

  • The Donor is aware of its Imminent Death from an Identifiable Cause.
  • The Donor make a Gift in contemplation of its Imminent Death.
  • The Gift is conditional upon Death.
  • The Donor delivers the Gift, surrending Control and Title, or something representing Title.
    • With Chattel, Delivery with Intention is sufficient.

Consequence:

  • The Gift is valid upon the Donor’s Death.
26
Q

What is the Exception of the Unconscionable Principle?

A

The Principle:

  • Equity can Perfect an Impefect Gift if it would be Unconscionable to allow the Donor to withdraw.

Relevant Considerations (Non-Exhaustive):

  • Execution: The Donor took steps to execute the Gift.
  • Detrimental Reliance: The Donee Relied on the Donor’s intention to its Detriment.
  • Delivery of Documents: The Donor gave the Donee the means to complete Execution.
  • Voluntary Intention: The Donor made the Gift voluntarily, without Undue Influence.
  • Communication of Intention: The Donor communicated its intention to make a Gift to the Donee.

The Donor’s conduct is central to this analysis.

The Courts are careful to prevent the Unconscionability Principle from being misused to bypass necessary legal steps.

27
Q

Regarding Constitution, what is the Difference between a Traditional and Self-Declared Trust?

A

Traditional Trust:

  • Legal Title must Vest in the Trustee for Constitution to occur.

Self-Declared Trust:

  • Constitution occurs automatically because the Settlor already has Legal Title.

This also applies to Gifts.

28
Q

Regarding Constitution, what is Different about Testamentary Trusts?

A
  • Constitution is managed by the Will.
  • The Personal Representatives first obtain Legal Title, and then Vest it in Trustees or Beneficiaries, or preserve it as Trustees themselves.

In all other Trusts, there are specific means of effecting Constitution based on the given Property, e.g. Deed of Transfer, Stock Transfer Form, Notice, etc.

29
Q

What is the Rule in Saunders v Vautier ?

A

Prerequisites:

  • The Beneficiary is an adult of sound mind.
  • The Beneficiary has a Vested or Contingent Interest in the Trust Property.
    • Contingent Beneficiaries require collective agreement to exercise the Rule, including Objects of Gift-Overs.
  • The Beneficiary is:
    • Solely and absolutely entitled to the Trust Property; or
    • Has a distinct Interest in the Trust Property whose severence would not affect other Interests; or
    • Where Interests are interdependent, all Beneficiaries agree.

Consequences:

  • The Beneficiary can direct the Trustee to transfer Legal Title to it, thereby collapsing the Trust.
  • Where multiple Beneficiaries are instructing, the Trustee is directed to transfer Legal Title in such shares as they choose.
30
Q

What is are the Two Types of Purpose Trust?

A
  • Charitable Trusts.
  • Non-Charitable Trusts.
31
Q

What are the Elements of a Charitable Purpose Trust?

A
  • The Trust is for a Charitable Purpose.
  • The Trust satisfies the Public Benefit Test.
  • The Trust is wholly and exclusively Charitable.
32
Q

What are the Statutory Charitable Purposes?

A
  • Poverty.
  • Religion.
  • Education.
  • Amateur Sport.
  • Animal Welfare.
  • Relief for the Needy.
  • Armed and Rescue Forces.
  • Health and the Saving of Lives.
  • Art, Culture, Heritage, or Science.
  • Citizenship or Community Development.
  • Environmental Protection or Improvement.
  • Civil Rights, Human Rights, or Conflict Resolution.

The Court will strive to resolve any uncertainty and hold the Trust valid once it has established Charitable Intent.

33
Q

What is the Public Benefit Test for Charitable Trusts?

A
  • The Trust is not political.
  • The Trust’s Detriment does not outweigh its Benefit.
  • A sufficiently large Section of the Public derives an Objective, Identifiable Benefit from the Trust.
    • This Section must not be solely distinguished by its relationship to an Entity or Person.

The Charity Commission may require Evidence.

“A bridge may be charitable and it does not matter how many people actually use it. But confine its use to a selected number of persons, however numerous or important, and it is not charitable.”

34
Q

When may a Charity choose to focus on a Particular Demographic of Beneficiaries?

A
  • The Poor are not excluded.
  • It has proper reason for doing so.
  • The Demographic is a sufficiently large Section of the Public.
35
Q

When can a Charity Charge for or Profit from its Services?

A
  • When it is reasonable and necessary to execute its Objectives; and
  • It does not unreasonably restrict the opportunity to benefit.
36
Q

What are the Elements of a Non-Charitable Purpose Trust?

A
  • Testamentary Origin.
  • Willingness of the Trustee.
  • Absolute Certainty of Purpose.
  • Applicability of an Endacott Exception.
  • Respect for the Common Law Perpetuity Period.
37
Q

Regarding Non-Charitable Purpose Trusts, what is the Absolute Certainty of Purpose Requisite?

A

The Trust’s Purpose must be so clear that if the Trustee surrendered its discretion, the Court could effectively administer the Trust.

38
Q

What are the Endacott Exceptions?

A

The Trust’s Purpose is for:

  • The saying of Private Masses.
  • The preservation of a Particular Animal.
  • The erection or maintenance of a Private Grave or Monument.
39
Q

What is the Cy-Près Doctrine?

A

If a Charitable Purpose Trust fails, the Court or Charity Commission will apply the Trust Property to another Charitable Purpose.

40
Q

On what Grounds may the Original Purpose of a Charitable Gift be Altered?

A
  • The Original Purpose has been fulfilled.
  • The Original Purpose cannot be executed.
  • The Trust Property from similar Charitable Trusts is combined to increase efficacy.
  • The Original Purpose may still be fulfilled but would leave a surplus of Trust Property.
  • The Original Purpose referred to an Area or Class that is no longer relevant or suitable.
  • The Original Purpose has:
    • Ceased to be Charitable in Law.
    • Been adequately provided for by other means.
    • Ceased to provide a suitable and effective method of using the Trust Property.

(FLK2) Equity and Trusts (7 decks)

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