Express Trusts

Question 1

What is an express trust

Answer 1

A trust that the settlor expressly intends to create.

Question 2

What must a settlor do to create an express trust

Answer 2

(a) make a valid declaration of trust.
and
(b) put assets in the trust

Question 3

What is a declaration of trust?

Answer 3

Essentially the instruction manual on how the trustees should run the
trust and who will ultimately benefit from the trust.

Must:
(a) identify the trustees;
(b) identify the property that is to be held in trust;
(c) identify the beneficiaries (this can be done by name or by description); and
(d) identify the powers and duties that the trustees have in running the trust and administering
trust property.

Question 4

2 common types of express trust

Answer 4

1. Fixed interest trusts
   Trustees have no discretion as to how the trust property is to be distributed between the beneficiaries. The settlor has stipulated this.
2. Discretionary trusts
   Gives the trustees a discretion as to the amounts any person may receive
   and/ or whether particular people receive anything at all.

Question 5

3 certainties needed for a valid declaration of trust

Answer 5

1. Certainty of intention (also known as certainty of words): it must be clear that the person
   making the declaration intended to create a trust;
2. Certainty of subject- matter: it must be clear what property is being held on trust and how that property will be shared

AND

3. Certainty of objects: it must be clear who the beneficiaries are.

Question 6

Certainty of intention - Precatory words

Answer 6

Express a wish, hope or expectation. Such words do not create a trust.

Question 7

Certainty of objects - Fixed interest trusts

Answer 7

Fixed interest trusts therefore must satisfy the complete list test.

If the beneficiaries are
described as a class of people, in order to satisfy the test, we need:
(a) conceptual certainty – is the description of the class clear and objective?; and
(b) evidential certainty – do we have the evidence to identify all the beneficiaries that will benefit under the fixed interest trust?

If test fails trust will fail.

Question 8

Certainty of objects - Discretionary trusts

Answer 8

• Given ‘postulant’ test:
  Can it be said with certainty whether any given postulant (individual) is or is not a
  member of the class of objects?
  Need conceptual certainty, not evidential - doesn’t matter if hard to prove.
• Administrative workability test
• Capriciousness (unpredictable)
  Discretionary trusts must overcome is that the trust cannot be capricious.

A discretionary trust may be capricious if there is absolutely no rational reason for the trust
or absolutely no rational basis on which the trustees can exercise their discretion to distribute
trust property.

Question 9

The beneficiary principle

Answer 9

In order to be valid, a trust must (subject to exceptions) be for the benefit of individuals.

Question 10

Rule against perpetuity/
rule against remoteness of vesting

Answer 10

To be a valid trust, the beneficial interests under the trust must vest – ie must become unconditional – within the relevant perpetuity period.

For trusts created on or after 1 April 2010, the perpetuity period is 125 years.

Question 11

2 methods for constituting express trust

Answer 11

1. the settlor appoints themselves trustee for the beneficiary by making a valid declaration
   of trust

OR

2. the settlor appoints someone else to be the trustee by making a valid declaration of trust.
   In this situation, the settlor must also transfer legal title in the trust property to the trustee.

Question 12

Exceptions to ‘equity will not assist a volunteer’

Answer 12

Equity will not perfect an imperfect gift e.g. if rules are not followed.

Exceptions:
* The ‘every effort’ test
The settlor must have passed the point of no return.
All that remains for the transfer to be completed is the act of a third party.

Once created trust when it was unfair for settlor to back out.

*The rule in Strong v Bird
If don’t get a chance to transfer before death. But executors and administrators are trustees. It is fine they got legal title this way if the conditions in Strong v Bird (1874) are satisfied:
(a) the settlor intended to create an immediate trust with a third party acting as trustee;
(b) that trust was not immediately created due to a failure to comply with a relevant
transfer rule;
(c) the settlor’s intention continued up to their death; and
(d) the intended trustee acquired legal title to the trust property by becoming the settlor’s executor or administrator.