Express Trust - Declaration of Trust

Question 1

What is a trust?

Answer 1

A trustee holds the legal interest in property on behalf of a beneficiary, who is entitled to the beneficial interest.

Trustees have various duties and beneficiaries can enforce the trust and those duties in some situations

Question 2

Difference between express and implied trusts

Answer 2

Express trusts are those which the settlor intended to create

Implied trusts are ones the law imposes to achieve a fair result (resulting + constructive trusts)

Question 3

What are the two broad elements of a valid express trust?

Answer 3

Declaration of trust and constitution of trust

Question 4

What are the elements of a valid declaration of trust? Give an overview

Answer 4

1) 3 certainties (intention; subject matter; objects)

2) Beneficiary principle – trusts need to benefit a human being, capable of enforcing it if the trustee does anything wrong

3) Perpetuities – trusts cannot last too long

4) Formalities – does it need to be in writing or not?

Question 5

Explain certainty of intention

Answer 5

The settlor must make it clear that they intend to create a trust

They should use mandatory language and it is helpful (but not essential) to use word ‘trust’

Expressing a wish or expectation is insufficient intention

Question 6

Explain certainty of subject matter

Answer 6

Trust property must be defined with certainty

• Giving away ‘some’ of a collection of items will only work if they are entirely indistinguishable from one another (50 shares out of 1000; likely only applies to intangible property)
• Settlor cannot create a trust of things they are yet to own

Beneficiary’s interests must be clearly defined too
* Assumption that each beneficiary gets a fair share if nothing expressly stated (£100k on trust for two children)
* Saying ‘give more to A than B’ is not clear enough

Question 7

Explain certainty of objects/given postulant test

Answer 7

We must know who the trustee is holding the trust property for (the names or class of beneficiaries)

Fixed interest trusts - sets out who the beneficiaries are and the proportions they will receive the trust property in - need conceptual and evidential certainty

• Conceptual - description of beneficiaries has an objective meaning
• Evidential - must be able to identify who falls within the class; if records lost, this would fail

Discretionary trusts - sets out the class of beneficiaries that might benefit, but leaves it to the trustees to decide who in the class will benefit and in what shares; needs conceptual certainty only

• The class cannot be too wide however (administrative workability)
• Must have a rational basis for trustees to decide who falls within the class (cannot make a trust for random unconnected people)

Question 8

Example of fixed interest trust

Answer 8

£100,000 on trust for my children equally

Question 9

Example of discretionary trust

Answer 9

£100,000 on trust for such of my children and in such shares as my trustees shall select

Question 10

Briefly explain the beneficiary principle

Answer 10

Trust must be for the benefit of individuals to be valid

Exceptions for purpose trusts

Question 11

Briefly explain perpetuities

Answer 11

Beneficial interests must vest within 125 years for trusts created on or after 1 April 2010

Trusts cannot last forever essentially

Exceptions for purpose trusts

Question 12

What are the formalities for a trust over land?

Answer 12

A declaration must be evidenced in signed writing, which must contain all material terms

If not evidenced in writing = void

Can be declared orally and then written down

Question 13

What are the formalities for other types of property (not land)?

Answer 13

Declaration can be made orally, but better to record it in writing