The Three Certainties Flashcards
What is certainty of intention?
There must be intention to create a trust
What is the necessary intention?
There must be an intention too impose or assume the duty which is characteristic of a trust, ie a duty to hold property for or apply property for the benefit of a beneficiary
How can a person’s intention towards creating a trust be ascertained?
Through examining their words and conduct
What approach do the courts take in determining whether a person intends to create a trust?
An objective approach to see if they have manifested an intention to impose or assume the duty which is characteristic of a trust, they intend to create a trust.
Do the subjective intentions of the parties matter in seeing if the requisite intention is there?
No - parties do not even have to know a trust is a concept
What approach is taken whether a written document amounts to intention to create a trust?
Intention of author’s ascertained by identifying the meaning of the words which have been used.
Meaning of words to be ascertained by:
- natural and ordinary meaning
- any relevant contextual features of the document
- facts known or assumed by the authors when document was created
- common sense
What effect will the use of the word ‘trust’ have on deciding if there is intention to create a trust?
Will be a good indicator of intention to create a trust but will not be determinative - either by presence of absence
Relationship will be determined by substantive right and duties of parties not how it was characterised by the parties
What effect will segregating/earmaking assets have on deciding if there is intention to create a trust?
Normally good evidence of intention to create a trust but not always conclusive evidence and not strictly necessary
What effect will context have in deciding whether there is a trust or not?
The words and context must be taken into account in deciding whether there is intention to create a trust.
What are the two requirements for there to be certainty of subject matter?
- the trust property requirement - it must be possible to identify the trust property
- the beneficial entitlement requirement - must be possible to ascertain the beneficiary’s interest in the trust property
Why is it necessary for the trust property to be identified?
- duty to hold property for beneficiaries or to apply it for their benefit is meaningless unless it is possible to identify the property which it relates
- assertion of an equitable right is futile unless it is possible it is possible to identify the property against the right is being asserted
What potential problem is there when identifying trust property by description?
If it is not possible to ascertain the trust property from description - trust will fail for uncertainty
Will a trust over a fractional interest of a wider mass be certain?
Yes - will hold fractional interest in each object eg 20% of settlor’s five one carat diamonds - beneficiary has 20% share in each of them
What is fungible?
Means identical and readily exchangeable
What assets can a specified number out of a bulk create a valid trust?
Assets that are fungible and intangible
What assets will a specified number out of a bulk not create a valid trust?
- fungible tangible assets
- non-fungible, tangible assets
- non-fungible, intangible assets
What is the beneficial entitlement in relation to trust property?
It must be possible to ascertain the nature and extent of the beneficiary’s interest in that trust property
What is certainty of objects?
Objects need to be certain so trust can be regulated and enforced by the court if necessary
What can be objects of the trust?
- beneficiaries or
- purpose in purpose trusts
Is certainty of objects the same for all trusts?
No - certainty required is greater for fixed trusts than discretionary because trustee has no flexibility - they must distribute as the settlor intended so they must know exactly who is to benefit
What happens is there is uncertainty as to the beneficiaries of a fixed trust?
The trust will fail.
If multiple beneficiaries and only one identity is uncertain then trust will not necessary completely fail - other beneficiaries can still claim their interest
What is the test for certainty of objects where there is a trust that requires equal distribution between a class?
Complete list test - must be possible to draw up a complete list of all the beneficiaries
Requires both
- conceptual certainty and
- evidential certainty
What is conceptual certainty?
Refers to the precision of certainty used by the settlor to define the class of persons whom they intend to benefit
What is evidential certainty?
Refers to extent to which the evidence in a particular case enables the trustees to identify the objects of the trust
What test of certainty must a power of appointment satisfy in order to be valid?
The is/is not test
What is the is/is not certainty test?
Requires a trustee to say with certainty whether ‘any given individual is or is not a member of the class’
What test of certainty of objects is required for a discretionary trust?
The is/is not test
What categories of people are said to be certain enough to satisfy the is/is not test?
Children, employees and relatives (descendants from a common ancestor)
What category of people is not said to be certain enough to satisfy the is/is not test?
Friends
Who bears the burden of proving they fall within a class of beneficiaries for a trust?
The claimant. If they cannot prove that they are in the class they are considered to be outside it
What is administrative uncertainty and what effect will it have on a discretionary trust?
Administrative unworkability - class of beneficiaries ‘is so hopelessly wide as not to form ‘anything like a class’ so that the trust is administratively unworkable
Any trust that is administratively unworkable will be void
Eg inhabitants of Greater London
Does the size of class for a fiduciary appointment matter for validity on basis of administrative uncertainty?
No - can be power to appoint property to anyone in the world and still be valid
What is the consequence of uncertainty with lifetime trusts where there has been no transfer of legal title?
There will be no change of beneficial ownership unless all three certainties are satisfied
What are the consequences of uncertainty with lifetime transfers where legal title has been transferred?
- if no certainty of intention presumption of resulting trust applies (can be rebutted ie making transfer a gift)
- if clear intention for transferee to be trustee, automatic resulting trust arises if there is uncertainty of subject matter or objects
What are the consequences of uncertainty with testamentary trusts?
- if no certainty of intention then outright gift
- if uncertainty as to subject matter or objects, the trust fails and property falls into residue
