Law of trusts

Question 1

what is trust ?

Answer 1

trust is the concept that came out of the idea equity 

Question 2

Penner, in The Idea of Property in Law 1997 :

Answer 2

“A trust exist when I particular fund of property is held by a legal owner ‘on trust’ for a beneficiary.

Question 3

Elements of trust (settlor)

Answer 3

Settlor (original legal owner of the property) : they are called this because they intend to settle the property in trusts :
• must be alive and must wish for the trust to take effect when they are alive
• if they are dead, or which for the trust to take effect when they are dead they are called ‘testator’

Question 4

Two ways a legal owner can declare a trust of their property :

Answer 4

Declaration by transfer : transfer property to trustee, who will hold the property on trust for the benefit of another (the beneficiary)

Self declaration of trust : legal owner declares themselves as a trustee who will hold the property on trust for the beneficiary

Question 5

Elements of Trusts (property)

Answer 5

The property that is being held on trust for the beneficiary

Question 6

who is the trustee

Answer 6

The trustee is the 3rd element of the trust :

The trustee is the person who holds the profit on trust will benefit of the beneficiary

This means they will have legal ownership of the property, but it also means they have duties and obligations to the beneficiary in equity

if the trustee fails in their obligations, under the provisions of the trust, they will be said to be in breach of trust and the beneficiary be entitled to remedy

Question 7

Who is the beneficiary?

Answer 7

The person who will benefit from the property that is held on trust.

Question 8

What are the two important characteristics of a trust ?

Answer 8

1. the separation of legal and equitable ownership in the property
   • The owner will not have an equitable interest in the property placed on trust (they are just the legal owner)
2. the separation of the management and the benefit of property placed on trust
   • When a property is placed on trust there is a separation of the control of that property with the right to benefit from that property

Question 9

Can there be an equitable ownership without trust ?

Answer 9

No
Equitable ownership is only created when a trust is established

(also without an equitable interest, there is no trust)

Question 10

Wesdeutsche Landesbank Girozentrale v Islington LBC (1996)

Answer 10

“ a person solely entitled to the full beneficial ownership of money or property both at law, and in equity does not enjoying equitable interest in the property.
The legal title carries with it all rights
Unless there is a separation of the legal and equitable estate, there is no separation equitable title.

Question 11

Settlor ➡️ Trustee ➡️ Beneficiary ➡️

Answer 11

Settlor transfer legal title to trustee
Settlor declares the property to be held on trust for beneficiary
Trustee has equitable obligations to the beneficiary

Question 12

what is express trusts ?

Answer 12

where the settlor/testator will declare an express intention for the property in question being held on trust

explicit : ‘this is going to be held on trust’
or
can be inferred from language that the intention of the settlor was to create an express trust

Question 13

Types of express trusts :

Answer 13

Fixed express trust :
The settlor/testator clearly specifies the trust, trustee and beneficiaries
This means the trustee has no discretion as to the proper order and purpose of the trust.

Discretionary trust :
The trustee had s discretion as to who may be the beneficiary of the trust

Purpose express trust :
The trust is said to be established for a purpose not a person

Question 14

What is implied trust ?

Answer 14

There is no express intention
(courts have to imply the existence of the trust)

Question 15

What are the two types of implied trusts ?

Answer 15

Resulting trust:
This comes into existence by law where property has transferred to someone who pays nothing for it.
It is an implied that property is held on trust for the benefit of another person
(may also exist in the case of failed express trust)

Constructive trust :
The court fines that I trust should arise out of an operation of law, due to unconscionable conduct by the person who received the property
The court doesn’t examine the intention of the person who is transferring the property, but the action of those who receive the property 

Question 16

What happened if trust fails (Implied trust) ?

Answer 16

an automatic, resulting trust response to the gap in the ownership

The property will then go back to the original owner

Question 17

What is being referred to when talking about powers under trust ?

Answer 17

The powers given to the trustee

Question 18

Gifts :

Answer 18

property transferred from A to B without any creation of trust or need for the property to be held on trust by trustee

Question 19

The fixed trust :

Answer 19

A would have to declare their intention to create trust, transfer the property to a trustee who will hold that property on trust for the benefit of some beneficiary

trustee : holds the money on trust
beneficiary : receive an equitable interest

Question 20

Trust & power

Answer 20

A intends to give £200 to a trustee to be held on trust for the benefit of B, but the trustee also has power to appoint that sum of money to a charity as the trustee may he see fit

This is fixed trust but with power of appointment given to the trustee

Question 21

Gift over in default

Answer 21

A give £200 to a trustee who had the power to appoint the money to which ever charity they see fit. However in default of this appointment the money is to be transferred to B

In this case the trustee has the power to appoint, but if the power is no excised (defaults) then the money is to be transferred to B

Question 22

The Discretionary of express trust

Answer 22

A intends to create trust
they give £200 to a trustee to hold the property on trust with the absolute discretion to decide which charity it shall go to
since there is no power of appointment the money has to be held on trust but not appointed

Question 23

What does fiduciary mean ?

Answer 23

A fiduciary relationship is one which the court determines to be a relationship of trust and confidence
(there are certain duties that are incurred if it is found that fiduciary relationship exist)

Question 24

What is an Archetypal fiduciary relationship ?

Answer 24

One that exists between the trustee and the beneficiary

Question 25

What happened if there is an excercise of power ?

Answer 25

there can be restraints and limitations placed on the trustee by the cour
example
a court may suggest that a power is excersied fairly not fraudulently

Question 26

RE Hay’s Settlement Trust 1981

Answer 26

The trustees were directed to hold a trust fund and were given the power of appointment at their own discretion.
they were to hold the trust for the beneficiaries
this case is important because gives us an explanation as to the duties which are incurred on the trustees in respect of a fiduciary power

Question 27

Duties of Trustee (fiduciary power)

Answer 27

1. consider periodically whether or not they should exercise the power
2. consider a range of objects of the power
3. consider the approach of individual appointments

Question 28

Turner v Turner 1984

Answer 28

Involved the creation of a trust settlement made up of :
A trust for family members
The power of appointment under which the trustees were able to distribute income to any, or all of the beneficiaries

The court held that there was a duty to consider their decisions relating to the power of appointment

Question 29

Knight v Knight 1840

Answer 29

three certainties :
Certainty of intention (to create a trust) :
equity will not perfect an imperfect gift
(Jones v Lock 1865)
expressed or implied (Paul 1977)

certainty of subject matter (property) :
mixed/bulk
(Lehmann Brothers 2011)
property must be identifiable

certainty of objects (beneficiaries/charitable principles) :
(RE Astor’s settlement 1952)
certainty of objects
fixed trust : complete list of beneficiaries
(IRC v Broadway Cottages 1955)
Discretionary trust : any given postulant / is or is not test
(McPhail v Doulton 1970)

Question 30

Beneficiaries principle : exceptions

Answer 30

Anomalous cases
Charitable trust

Re Denley’s trust deed 1969
‘ trust through express as a purpose directly or indirectly for the benefit of an individual or individuals. It seems to me that it is in general outside mischief, all the beneficiary principles.’