Head 15: Creating an Express Trust

Question 1

What acts are needed to create an express trust?

Answer 1

Two juristic acts are needed

1. Declaration of trust
2. Transfer of property

Question 2

How is a declaration of trust made?

Answer 2

Declaration of trust is by the truster and usually in writing. The deed of trust does not have legal
effect until it is delivered. The trust takes effect as soon as it is communicated by oral declaration
(look this up**). In a mortis causae trust the declaration of trust is a will in writing. Another
distinction is that there is no need to deliver your will to the executors or trustees. The trigger point
for a will coming into effect is the testators death.

Question 3

What should you say as a trustee?

Answer 3

No magic formula — can say “for the benefit of”. See Gillespie v City of Glasgow Bank

Question 4

Gillespie v City of Glasgow Bank

Answer 4

where two partners held shares in the bank and they had to pay an enormous sum of money arising out of the crash of that bank and it was held that this formula “for the behoof of the firm” meant that they held the shares in trust for the firm so they were jointly and severally liable.

Question 5

Scarlett??

Answer 5

However must look at the deed as a whole — is it really setting up a trust? Scarlett: documents were not sufficient to create a trust over that money, which was important as the department store became insolvent. As there was no trust the money was available to the creditors; whereas if they had held it in trust for the folding agent then the private creditors would not have been able to get at it.

Question 6

In wills — is an expression of wishes tantamount to the creation of a trust?

Answer 6

See Garden’s Exr: where it was not enough to impose a trust.

Question 7

Can there be implied trusts?

Answer 7

There can be implied trusts, where trust implied from actions of the parties

Question 8

Barbour v Marriott 2012

Answer 8

Businessman bought two plots of land. One to build a house for himself and his cohabitant, another as a yard for his business. For business reasons, title was taken in the name of his cohabitant. When they split up years later the businessman asked his cohabitant to reconvey it to him. She refused. The businessman then argued that it was an implied trust. We don’t know what the actual result of the case was but the sheriff principal stated that he had heard enough to interdict the wife from selling it while the court investigated further.

Question 9

What is required to create an express trust?

Answer 9

Express trusts
⁃ Express trusts are created by juristic persons. Two juristic acts are required to create an express trust:
⁃ 1) The declaration of trust
⁃ 2) The transfer of trust property to the trustees.

⁃ Usually these two acts take place separately but they can be done simultaneously e.g. taking out a life assurance policy and simultaneously assign it to trustees. May be run together.

Question 10

What is the form required for an inter vivos trust?

Answer 10

Can be in oral or writing;

Question 11

What is the form required for a truster-as-trustee trust?

Answer 11

almost without exception in writing RW(S)A 1995, s 1(2)(a)(iii), but they can be oral in the circumstances set out in s 1(3) (this is extremely rare)

Question 12

What is the form required for an inter vivos trust?

Answer 12

Must be in writing under the RW(S)A 1995, s 1(2)(c).

Question 13

What is the trust deed?

Answer 13

Writing containing the declaration is often called the trust deed.

Question 14

Is declaration alone sufficient?

Answer 14

The declaration on its own is insufficient. The truster must actually deliver the trust property to the trustees.

Question 15

When is a declaration of trust made in an inter vivos trust?

Answer 15

where the declaration is in writing and the trust is inter vivos, at the moment when the deed of trust is delivered to the trustee;

Question 16

When is a declaration of trust made in a mortis causae trust?

Answer 16

where the declaration is in writing and the trust is mortis causa, at the moment when the truster dies.

Question 17

When is a declaration of trust made in an oral trust?

Answer 17

where the declaration is oral, when it is first pronounced in the presence of the trustee

Question 18

What is the required content of a trust?

Answer 18

No special words are required. This means that equivalents can be used like: “for the benefit/behoof of” is a recognised equivalent to trust, Gillespie v City of Glasgow Bank (1879)[ A trust was held to exist by using the words “for the behoof of”.], but depends on context (these words won’t automatically create a trust), see Style Financial Services Ltd v Bank of Scotland (No 2) 1998[ Money was taken from a customer in a department store in Edinburgh and held for the benefit of a finance house Style. Although the words “for the benefit of” were used, the court held that this was not a trust - all it was was a forwarding arrangement under which the money was held for a bit then forwarded to Style.] SLT 851.

Question 19

What are the issues with precatory trusts?

Answer 19

Another area where problems arise is where legacies are given with directions or expressions of wishes to the legatee. I think these are known as precatory trusts but look up.

Question 20

Garden’s Ex v More 1913

Answer 20

the testator provided in his will: “I should like not less than £50 sterling left to the widow of my brother and I desire that my wife make a settlement providing for this.” It was held this was merely an expression of wishes and was not sufficient to impose a trust on the wife.

Question 21

What must the trust deed also specify in addition to the declaration?

Answer 21

In addition to declaring the trust the declaration must also specify:
⁃ a) the trust property (more can be added later)
⁃ b) the trust purposes; and
⁃ c) the beneficiaries (or at least indicate how they are to be ascertained), but not for a public purpose trust.

Question 22

What is the general rule on the transfer of ownership of a trust?

Answer 22

Ownership of the trust property must be transferred from the truster to the trustee (generally, but not necessarily, from the truster).

Question 23

What are the rules on the transfer of ownership in an inter vivos trust?

Answer 23

In inter vivos trusts the owner will transfer the property to the trustees by the appropriate methods, disposition and registration (for heritage property), assignation and intimation (for shares or life policy), or delivery (corporeal moveables).

Question 24

What are the rules on the transfer of ownership in a mortis causa trust?

Answer 24

In mortis causa trusts property of the deceased vests a personal right in executors by confirmation, Succession (Scotland) Act 1964, s 14(1). If executors same as trustees make up title to property, if not they transfer it. There is no owners the executors merely act as stewards. NB confirmation takes months/year.

Question 25

When is the trust constituted?

Answer 25

One would have thought that whether both the above steps (delivery of deed and transfer of property) are required would have been settled long ago but because it is so basic it hasn’t been properly addressed at all. There is no real authority one way or the other.

Under the conventional analysis the trust is constituted only when both steps are completed. This means that the truster can revoke at any time up to point of transfer and no trust is created until the trustees become vested by registration/if trustees do not complete title they do not become vested.
⁃ However there is an alternative analysis. Professor Ken Reid in his article, “Constitution of Trust” 1986 SLT (News) 177 and Scottish Law Commission DP No 133 takes a different view. Standard inter vivos trust comes into existence as between truster and trustees when trust deed delivered (or equivalent) to trustees. Truster can’t change mind. Trustees can enforce transfer of property. But property and third-party effects only when property actually transferred. Then trustees get real right and truster divested. Property no longer available to truster’s personal creditors.
⁃ [So what is the trust property at the stage where the trust becomes valid? It is the enforceable obligation to put money into the trust - this is the first asset in the trust patrimony. But the property and the third party effects come into effect only when the property is actually transferred - it is only when this is done that the trustees get a real right to the property (before this they merely have a personal right against the truster to get them to deliver the property to them. At this point the truster is divested of the property and his personal creditors can no longer get at the money. On the other hand, as soon as this property comes into the trust patrimony it is available to trust creditors.]
- NB the trust

Question 26

Why is the conventional analysis wrong for mortis causa trusts?

Answer 26

And for mortis causa trusts conventional analysis is clearly wrong. This is because the trust comes into being as soon as truster dies even though trustees may never own the property. Beneficiaries get vested rights on truster’s death. This only involves writing and intimation to the beneficiary (very quick). The assets essentially remain with the owner. Rangers tickets and proceeds were meant to be held in trust.

Question 27

How is property transferred in truster-as-trustee trusts?

Answer 27

No actual transfer of property from truster to trustee; there is simply a property transfer between patrimonies. Two stages for normal trust collapse into one. The intimation of the declaration to beneficiary creates trust and a new trust patrimony and “transfers” the property to it.

Question 28

Is the publicity principle involved in the transfer of trust property?

Answer 28

Although the transfer of ownership is, to some degree, a public event, the act of creating a trust is essentially private and secret. The publicity principle is not observed. But –
⁃ (a) in practice deeds of trust are often registered in the Books of Council of Session or sheriff court books, and all wills proceeding to confirmation are so registered;
⁃ (b) charity trusts are now registered in a public register, the Scottish Charity Register (see below);
⁃ (c) if the trust property comprises or includes land, the transfer to the trustee is registered in the Land Register (or Register of Sasines), and often identifies the grantee as a trustee.

Question 29

What is the proposed EU directive about?

Answer 29

Proposed EU Directive would require full details of the truster, the trustees and the beneficiaries to be listed in a public register for every trust and this information to be kept up to date. This has been shot down.