Requirements for a Valid Trust Flashcards
What are the two requirements for an express trust to be enforceable?
- Make a valid declaration of trust
- Put assets into the trust
What happens if the settlor does not constitute the trust?
No trust exists; the settlor remains the absolute owner of the property
What are the two methods of constituting an express lifetime trust?
- Settlor appoints themselves trustee
- Settlor appoints someone else as trustee
What must the settlor do if they appoint someone else as trustee?
Make a valid declaration of trust and transfer legal title to the trust property
What is required to transfer legal title to land in a trust?
- Execute a deed
- Give the executed deed to the trustee or send it to Land Registry
What is a deed according to the Law of Property (Miscellaneous Provisions) Act 1989?
A document that is stated to be a deed and is signed in the presence of a witness
What is the process for transferring legal title of shares in the CREST system?
Shares are transferred electronically and instantaneously without paperwork
What paperwork is required to transfer shares outside the CREST system?
- Execute a stock transfer form
- Provide the executed stock transfer form and share certificate to the trustee or company
How is legal title to money transferred?
- Cash is handed over
- Electronic transfer to the trustee’s bank account
- Cheque is cleared
What are chattels?
Tangible assets such as jewellery, furniture, and paintings
What is the maxim of equity regarding volunteers?
Equity will not assist a volunteer
What does the ‘every effort’ test entail?
If the settlor did everything they could to transfer legal title, the transfer may be regarded as complete in equity
What case illustrates the application of the ‘every effort’ test?
Pennington v Waine [2002] EWCA Civ 227
What is the rule in Strong v Bird?
If the intended trustee becomes the settlor’s executor or administrator, legal title can constitute the trust
What conditions must be met for the rule in Strong v Bird to apply?
- Settlor intended to create an immediate trust
- Trust not created due to failure to comply with transfer rules
- Settlor’s intention continued up to death
- Intended trustee acquired legal title as executor or administrator
Fill in the blank: Legal title to chattels is passed by _______.
[physical delivery of the asset to the trustee or by deed]
What must happen for legal title to land to be transferred?
Land Registry must register the trustee as the new legal owner
What must a settlor do to transfer legal title of private company shares?
Execute a stock transfer form and provide it along with the share certificate
What must be done for a cheque to transfer legal title?
The cheque must clear
What happens when the settlor appoints themselves and a third party as trustees?
The settlor must transfer legal title into the joint names of the trustees
What must a settlor comply with when transferring shares in a private company?
Must sign a stock transfer form as the named transferor
What did Lord Browne-Wilkinson observe in Choithram (T) International SA v Pagarani?
There can be no distinction between a settlor declaring themselves as sole trustee and one of the trustees
What is unconscionable for a settlor after making a valid declaration of trust?
To back out of the trust
What must the settlor do after declaring a trust?
Transfer the trust property into the names of all the trustees
What are the three certainties?
- Certainty of intention
- Certainty of subject matter
-Certainty of objects
What is certainty of intention?
the language used must constitute a clear intention to subject the trust assets to a legally binding obligation for the benefit of beneficiaries
What is the difference between Precatory and Imperative wording?
Precatory words - indicate a hope or wish
Imperative words- read like instructions to follow
Can a trust be made both orally and in writing
Yes
Can an action be enough to constitute intention?
Yes - Re Kayford - the action of a company in moving its funds into a separate bank account to protect the funds in the event of insolvency was considered to create a trust.
What happens if the settlor or testator fails to make their intention clear?
The trust will be void for lack of certainty of intention. An outright gift will have been deemed to be made to the trustee (Re Adams & the Kensington Vestry)
If certainty of intention is apparent but there is no actual intention to create a trust will the trust still be validly constituted?
No. If the settlor did not in fact intend to create a trust , regardless of language used, the trust will be deemed a sham and be invalid
What is the court’s attitude toward mistakes in the trust document?
- may be rescinded by the court so that the trust assets revert back to the settlor
- the court may rectify the mistake so as to express the settlor’s true intention.
- sufficient evidence is needed in support
What is the court’s attitude towards a mistake in the document that relates to the legal effect of the trust?
the trust remains valid (Pitt v Holt, Futter v Futter (2013)
What are the two key aspects of certainty of subject matter
-identification of the trust property
- clarity of beneficial entitlements
What must be done if a settlor intends to place a share , but not all of certain assets in the trust
the share must be clearly identified.
use of ‘a portion’ ‘a share’ ‘part of’ or ‘the bulk’ will be insufficient for establishing certainty of subject matter.
What are the rules for intangible property, eg shares
- Intangible property does not always require segregation
- Shares of the same type in the same company need not be specifically identified as there is no difference in which shares are transferred.
What are the rules for tangible property
must be clearly identified and separated from other property. If they are identical and there is no clear separation, the trust will be void
Which seemingly uncertain trust terms are considered to be certain
‘all of my real and personal property’
- this means all of the settlor’s or testator’s assets
‘a reasonable income’ - deemed to be sufficiently certain in Re Golay’s Will Trusts
What is the effect of unclear beneficial interests?
the trust fails for lack of certainty of subject matter and be held in resulting trust for the testators residuary beneficiary.
What does it mean for the beneficial interest in the trust property to be clearly defined?
- It must be clear how the trust property is to be distributed among the beneficiaries
what are certainty of objects?
Objects refer to the beneficiaries of the trust . they must be clearly identified, even in the case of a discretionary trust
what are the two tests for certainty of objects
fixed trusts and discretionary trusts
- fixed trusts- complete list
-discretionary trust- conceptual certainty
what is the fixed trust test?
fixed trust test - complete list of individual beneficiaries is required.
Can provide for a group of people, such as all the past and present employees of a company
What is the conceptual certainty test for discretionary trusts
the meaning of the words used in the trust should be sufficiently clear so that it could be said of any one person whether they would or would not be a member of the class
Is the term ‘friends’ sufficiently certain?
- conceptually uncertain as it has a range of meanings.
what does the term ‘children’ include in relation to certainty of objects
includes legitimate and illegitimate children born out of lawful wedlock, as well as adopted children
- but NOT a natural child who has been adopted by someone else unless contrary intention included.
- does not include stepchildren who have not been adopted.
what are the minimum requirements for friends in re barlows will trusts
- the relationship must have been a long standing one
- the relationship must have been a social relationship as opposed to a business or professional relationship
- must have met frequently where circumstances permitted.
Is the term ‘old friends’ in a discretionary trust certain
No
what is the effect of a trust that is void for certainty of subject matter/objects
trusts return to the settlor or to the testators estate on a resulting trust.
What is a mere power
a trust-like power that is conferred but which the trust does not compel the trustee to exercise - so the trustee may advance money to the beneficiary
example : the trustees may give 10k to X or the trustees can, at their own and absolute discretion give 10k to X
Does an object of a trust have a proprietary interest to the trust?
No. they only have the right to compel the due administration of the trust and the right to be considered by the trustee.
Can the courts force a trustee with a mere power to exercise the power itself ?
No. they can only compel trustee to act responsibly
what is the test for fiduciary mere powers ?
is or is not test
a postulant (potential beneficiary) that comes before the trustees, the trustees must be able to say whether the beneficiary is or is not within the class of beneficiaries
what is the effect of a postulant that cannot be determined
the trust will be void for uncertainty (only in the context of fiduciary mere powers)
when will a power that is merely incidental not be enforced?
when its application appears capricious ( advantgae a random group of individuals with no connection to the settlor)
What are the different potential forms of uncertainty
- conceptual uncertainty
- evidential uncertainty
-ascertainability
-administrative unworkability
What is conceptual uncertainty
the meaning of the words in a trust document are unclear so that a group of or clas of beneficiaries cannot be defined.
What is evidential uncertainty
Voids a claim where an individual cannot prove that they fall within a class of beneficiaries due to there being a question of fact which is impossible to answer.
the individuals attempted claim will be void, not the trust
Describe ascertainability
ascertainability applies where a trust is conceptually certain, but it is impossible to locate the beneficiaries. trust itself will only be void if it means that the trust is administratively unworkable.
Administrative unworkability
A trust may be void for reasons of administrative unworkability when the trustees are unable to practicably carry out the settlor’s or testator’s intentions eg because class of beneficiaries is too wide.
eg : ‘gift for all residents of london’ is administratively unworkable (McPhail v Doulton (1970)
what is the effect of a trust void for uncertainty (settlor)
resulting trust arises - trust assets are held for the settlor
what is the effect of a trust void for uncertainty (testator)
the trust assets are held for the benefit of those entitled to the residuary estate
