Large Group 3 Flashcards
What are the two essential requirements for creating a valid express trust?
- Declaration of trust: The settlor must declare the terms of the trust.
- Vesting of property: The trust property must be transferred to the trustee.
What is the significance of the case McPhail v Doulton in relation to express trusts?
The litigation in McPhail v Doulton lasted 10 years, demonstrating the importance of ensuring that a trust declaration is clear and complies with formalities. If the declaration is ambiguous, it can lead to lengthy legal disputes.
What are the three methods of creating a trust?
Self-declaration as trustee: The settlor declares themselves as trustee over their property.
Transfer of property to a trustee during the settlor’s lifetime: The settlor transfers the property to another trustee.
Creation of a trust by will: The settlor transfers property in their will to a trustee for the benefit of a beneficiary.
What formalities are required to declare a trust over land?
Under Section 53(1)(b) of the Law of Property Act 1925, a trust over land must be in writing and signed by the person capable of declaring the trust. Without written evidence, a trust over land is unenforceable.
Can a trust over personal property be created orally?
Yes, trusts over personal property (such as money, shares, or chattels) can be created orally or by conduct, although it is better to have them in writing for evidential purposes.
What is the ‘every effort test’ from Re Rose in relation to trusts?
The ‘every effort test’ states that if the settlor has done everything in their power to transfer the trust property, equity will treat the trust as valid, even if some formalities remain incomplete.
What is the rule from Strong v Bird?
If the trustee is also the executor of the settlor’s estate and the settlor intended to make an immediate gift, the gift becomes valid upon the settlor’s death.
What is the rule from Pennington v Waine?
If it would be unconscionable for the settlor to withdraw the gift or trust, equity may enforce the trust even if the transfer formalities are incomplete.
What are the three certainties required for a valid trust?
Certainty of intention: The settlor must intend to create a trust.
Certainty of subject matter: The trust property must be clearly identified.
Certainty of objects: The beneficiaries or class of beneficiaries must be clearly identified.
What is the significance of the case Knight v Knight?
Knight v Knight established the requirement of the three certainties—intention, subject matter, and objects—for a valid trust.
What are precatory words, and why don’t they create a trust?
Precatory words are expressions of hope, wish, or desire (e.g., “in full confidence”). They do not create a trust because they do not impose a clear duty on the trustee. The case of Adams v Kensington Vestry confirmed this.
What is the significance of Paul v Constance in relation to trusts?
In Paul v Constance, the court held that even without using the word “trust,” a trust can be created through the settlor’s words or conduct if it is clear they intended to create a trust.
What happens if the trust property is uncertain?
If the trust property is not clearly defined, the trust will fail, and the property remains with the settlor. For example, in Palmer v Simmonds, the trust was void because the term “bulk of my estate” was too vague.
What is the difference between tangible and intangible assets in trust law?
Tangible assets (like wine in Re London Wine Co.) must be physically separated to create a trust, while intangible assets (like shares in Hunter v Moss) do not require physical separation to create a valid trust.
What is a fixed trust?
In a fixed trust, the settlor specifies the exact shares or interests that each beneficiary will receive. The trustee has no discretion in distributing the trust property.
What is a discretionary trust?
In a discretionary trust, the settlor gives the trustees discretion to decide which beneficiaries will benefit from the trust and how much they will receive. The trustees must act within the scope of their discretion.
What is the complete list test, and when is it used?
The complete list test is used in fixed trusts and requires the trustees to be able to create a complete list of all beneficiaries. If this cannot be done, the trust is void. The case of IRC v Broadway Cottages established this rule.
What is the ‘any given postulant test,’ and when is it used?
The any given postulant test is used in discretionary trusts. It requires that it be possible to determine with certainty whether any given individual is a member of the class of beneficiaries. This test was established in McPhail v Doulton.
What is administrative unworkability in trust law?
A trust is administratively unworkable if the class of beneficiaries is so large that it would be impossible for the trustees to carry out their duties. An example is the case of R v District Auditor ex parte West Yorkshire, where a trust for 2.5 million people was held to be unworkable.
What is capriciousness in trust law?
A trust is capricious if there is no rational reason for benefitting a particular class of beneficiaries, and the trustees have no reasonable basis for distributing the trust property. An example would be creating a trust for a random group of people with no connection to the settlor.
What is the rule against perpetuities?
The rule against perpetuities prevents trusts from lasting indefinitely. The trust must vest within a specified period, which, for trusts created after April 2010, is 125 years. If the trust doesn’t vest within this time, it is void.
What is the rule against remoteness of vesting?
This rule ensures that contingent interests in a trust must vest within the perpetuity period (125 years). If the contingent interests do not vest within this time, the trust is void.
What happens if a trust is not constituted properly?
If the trust is not properly constituted, meaning the property has not been validly transferred to the trustee, the trust will be void. Beneficiaries of an incompletely constituted trust cannot enforce the trust because they are considered volunteers.
What is the difference between fully constituted and incompletely constituted trusts?
A fully constituted trust is when the property is properly transferred to the trustees and the trust can be enforced by the beneficiaries. An incompletely constituted trust occurs when the transfer formalities are not fulfilled, and in such cases, equity will not assist the beneficiaries unless an exception applies (e.g., Re Rose, Strong v Bird, or Pennington v Waine).
