Requirements for lifetime creation of an express private trust Flashcards
How to create express trusts
1) Constitute the trust - transfer of the property to the trustees - done in the same way as gifts
2) Declare the trust - trustee’s instructions - 3 certainties, beneficiary principle, rules against perpetuity and complete any formalities for express declarations of trust
Constituting the trust
1) Settlor transfers the trust property to the trustees and makes a valid declaration of trust imposing the trust obligation on the trustees to hold on trust for the beneficiary
2) Settlor declares himself trustee for beneficiary by making a valid declaration of trust. Must make a declaration that you are now trustee - 3 certainties. No transfer of property is needed
Declaring the trust - Certainty of intention/words
Insufficient to use precatory words such as ‘in full confidence’, ‘hoping that’, ‘believing that’ and ‘expecting that’. Paul v Constance - Mr Constance stated frequently that ‘the money is as much yours as mine’ the court accepted that these words together with the course of conduct in relation to the bank account amounted to an express declaration of trust
Declaring the trust - Certainty of subject matter - First aspect - When creating the trust the settlor/testator must identify the trust property clearly
‘I give the bulk of my estate to X’ - there is no intention of how much constitutes the ‘bulk’ of the estate therefore subject matter is uncertain. Shares of the same class in the same company are indistinguishable from each other.
Declaring the trust - Certainty of subject matter - First aspect - When creating the trust the settlor/testator must identify the trust property clearly - Re London Wine Company
The buyers of wine stored in a warehouse but not segregated from the general stock of wine could not establish a trust as the subject matter was uncertain. The settlor had to identify which chattels he intended to form subject of the trust
Declaring the trust - Certainty of subject matter - Second aspect - The beneficial aspect must be certain
It must be clear what type of interest each beneficiary has and what shares they will respectively enjoy.
Declaring the trust - Certainty of subject matter - Fail because of lack of subject matter
if a trust fails for lack of certainty of subject matter, there is a resulting trust back to the settlor or if the intended trust was in a will the testator’s estate
Declaring the trust - Certainty of objects
Requires the settlor to define the beneficiaries with sufficient clarity when declaring the trust. E.g ‘on trust for my friends’ or ‘for my relatives’. Different legal tests which vary depending on the type of trust either a fixed or discretionary trust
Declaring the trust - Certainty of objects - Failure
If it doesn’t have certainty of objects then it will not have effect
Declaring the trust - The beneficiary principle
Trusts must have ascertainable human beneficiaries. a trust for a purpose as opposed to a trust for a human beneficiary has no one to enforce the obligation.
Declaring the trust - The rules against perpetuity
Law will only tolerate trusts that last for an acceptable period
1) Rule against remoteness of vesting - relevant to contingent interests and discretionary trusts - both void unless it vests within perpetuity period 80 years
2) Rule against inalienability - rules applies to non-chariatable purposes
Formalities for a lifetime express trust
Have to distinguish trusts of personalty and trusts of land
Formalities for a lifetime express trust - Personalty
No formalities needed. Declaration can be oral
Formalities for a lifetime express trust - Land
S. 53(1)(b) must fulfil 2 requirements:
1) Has to be evidenced in writing
2) The written evidence must contain the terms of the trust and be signed by the person able to declare the trust
