Express Trusts: Declaration

Question 1

What is a fixed-interest trust?

Answer 1

Under a fixed interest trust, the trustees have no discretion as to how the trust property is to be distributed between the beneficiaries. The settlor has stipulated once and for all who the beneficiaries are and the proportions in which they will share the trust property.

Question 2

What is a discretionary trust?

Answer 2

A discretionary trust gives the trustees a discretion as to the amounts any person may receive and/or whether particular people receive anything at all.

Question 3

What are the 3 certainties?

Answer 3

Certainty of Intention

Certainty of Subject Matter

Certainty of Objects

Question 4

What is the certainty of intention?

Answer 4

The settlor must have used words that impose a duty on someone to act as a trustee, ie the words must impose a duty on the trustee to hold property for someone else.

Question 5

What are precatory words and can they create a trust?

Answer 5

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

Question 6

What is the certainty of subject matter?

Answer 6

Both the trust property must be describe with certainty and the settlor must define the beneficiaries’ interest with certainty.

Question 7

Can future property be the subject matter of a trust?

Answer 7

A trust can only be validly created over property (or an equitable right in property) that the settlor currently owns.

Question 8

Can a part of a collection of items be the subject matter of a trust?

Answer 8

Yes, so long as the items in that collection are all identical. This is likely to be true only for intangible property, such as shares (and only then if those shares are truly identical).

Question 9

What is the certainty of objects?

Answer 9

The object of the trust is the beneficiary. The beneficiaries need to be identified with sufficient certainty so that the trustees know to whom they should distribute property.

Question 10

What is the test for certainty of objects in a fixed interest trust?

Answer 10

Under the complete list test, it must be possible to draw up a complete list of each and every beneficiary.

Question 11

How is the complete list test satisfied where the beneficiaries are described as a class of people?

Answer 11

There needs to be conceptual certainty where the description of the class is clear and objective. Secondly, there needs to be evidential certainty in that there is sufficient evidence to identify all the beneficiaries that will benefit under the trust.

Question 12

What is the test for certainty of objects in a discretionary trust?

Answer 12

The ‘given postulant test’ asks whether it can be said with certainty whether any given postulant (individual) is or is not a member of the class of objects? Conceptual certainty is required.

Question 13

What is administrative unworkability?

Answer 13

A discretionary trust will be administratively unworkable, and therefore invalid, if the class is so hopelessly wide as ‘not to form anything like a class’

Question 14

When is a discretionary trust capricious?

Answer 14

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 15

What is the beneficiary principle?

Answer 15

In order to be valid, a trust must be for the benefit of individuals.

Question 16

What are the rules against perpetuity?

Answer 16

When dealing with trusts for individuals, the relevant rule against perpetuity is known as the rule against remoteness of vesting. 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 17

What are the formalities for declaring a lifetime trust?

Answer 17

For lifetime trusts, most declarations of trust can be made orally,

Question 18

What are the formalities for declaring a a trust over land?

Answer 18

It must comply with s 53(1)(b) of the Law of Property Act (LPA) 1925. This requires that the declaration of trust must be ‘manifested and proved by some writing signed by some person who is able to declare such trust’. This means that the declaration of trust must be evidenced in writing signed by the settlor. If a declaration of trust over land does not comply with this formality, the trust will be unenforceable.

Question 19

What if a trust is declared over email?

Answer 19

An email is a written document and that email will be signed where they type out their name, inserted a signature block into their email settings. However, the email address, by itself, is not a signature.