Express Trusts Flashcards
methods of creating an express trust
1) self-declaration
2) transfer on trust
self-declaration of trust
settlor creates a new equitable interest for beneficiary but legal title remains with settlor
transfer on trust
settlor transfers legal title to trustee who holds it for beneficiary
requirements for creation of express trusts
- Certainty of creation
- certainty of subject matter
- certainty of objects
constitution of the trust
vesting trust property in trustee
certainty of intention
certain that settlor intends to create a trust as opposed to a gift
beneficiary principle
without beneficiaries the trust cannot be enforceable
intention
subjective intention not relevant. sufficient that settlor enters into arrangements that have effect of creating a trust, no necessary for him to realise
certainty of subject matter
trust will fail if description is too vague and not possible to ascertain trust property from description
trust for fungible, intangible assets
valid (eg. shares)
non-fungible, tangible
not valid (eg. diamonds)
fungible, tangible
not valid (eg. bottles of wine)
ascertaining beneficial entitlement
if trustee is given mechanism to determine beneficial entitlement trust is valid. but if mechanism fails and it’s not possible to ascertain beneficial entitlement the trust will fail
certainty of objects
trustees must know exactly who is to benefit and how much they are to receive
which type of trust requires greater degree of certainty of objects
greater degree of certainty is required for a fixed trust than a discretionary trust
fixed trusts
settlor sets out entitlement of each beneficiary in trust instrument
distribution between class of objects in fixed trusts
for this to be valid it must be possible to draw up a complete list of beneficiaries
certainty of objects for fixed trusts
trustee must be able to say with certainty whether ‘any given individual is or is not a member of the class’
certainty of objects for discretionary trusts
trustees have an obligation to consider the range of possible beneficiaries but dont need to be able to identify all. but trust will fail if class of objects is too wide
Express trust formalities
- must be in writing
- specific rules for trusts in land
rules for land trusts
- must be signed by settlor
- can be done by validly executed will
unenforceable
trust exists but beneficiary cannot enforce their rights
void
trust does not come into existence at all
constitution of trusts
settlor must do everything necessary to be done in order to transfer property & render the settlement binding upon him
constitution
transfer of legal title from one party to another
constitution of self declaration of trust
trust is automatically constituted when it is declared (no movement of legal title)
constitution for transfer on trust
requires legal title in property to be vest (constituted) in trustes
testamentary trust
created in a will
lifetime trust/ inter vivos trust
must comply with specific rules relating to type of trust property
formalities for choses in action (debt/ bank a/c balance)
must be by notice in writing to debtor & legal title transferred once notice is received
formalities for trust of shares
transferor signs stock transfer form, sends to company and legal title passes when transferee registered in company’s internal register of members
formalities for trust of registered land
must be by deed and title passed when registered at Land Registry
formalities for trust of chattles
either by deed of gift or delivery of chattel with evidence of transferor’s intention to transfer
formalities for trust of cheques
must endorse cheque (sign name on back)
when are self-declaration trusts constituted
constituted automatically when declared
In Re Rose
held that transfer of shares was effective in equity once transferor had done “everything in his power” to vest the shares in transferees.
what factors will be relevant for unconscionable principle
reliance, unfairness and if transferor was acting in bad faith
exceptions to Rule in Milroy v Lord
1) principle in Re Rose
2) unconscionable principle
3) fortuitous vesting
4) donationes mortis causa
failed constitution
if trust property is not vested in trustees the trust is incompletely constituted so is void
effect of constitution
disposition is irrevocable as settlor loses any legal/beneficial interest
Rule in Milroy v Lord
settlor had intention to create a trust but it was not constituted (failed to complete process or wrong method used) so trust failed
Extension of In Re Rose exception
extended principle to apply to registered land and it is
is it necessary for transferor to send docs to person capable of completing transfer?
no, only need to use the correct method and it will be irrevocable if transferor puts matter beyond their own control (sending to transferor’s agent is not outside their control)
unconscionable principle
court can perfect an imperfect gift whenever it would be unconscionable for the donor to resile from it
what does rule in In Re Rose apply to
gifts and trusts
death of transferor exception
fortuitous vesting occurs whereby legal title vests in the recipient in another capacity
fortuitous vesting
legal title vests in the recipient in another capacity (usually where recipient is also personal rep/ executor of settlor’s will)
which case sets out the rule for fortuitous vesting?
the rule in Strong v Bird
Rule in Strong v Bird
by appointing a transferee as executor of will, the transferor must have intended for them to have legal title
will Strong v Bird apply even where the recipient is one of several executors
yes
requirements for Rule in Strong v Bird
1) donor must have intention of make an immediate gift
2) gift must relate to existing and property currently owned by transferor
3) must be continuing intention to give (ie cannot change mind)
