The three certainties

Question 1

What are the three certainties?

Answer 1

1) Certainty of intention

2) certainty of subject matter

3) Certainty of object

Question 2

What is the objective test of Certainty of intention?

Answer 2

1) must manifest an intention to assume/impose duty which is characteristic of a trust

2) not needed to subjectively intend to create a trust

3) no need to even know what a trust is

Words and conduct is important

Question 3

What is certainty of subject matter? What are the two areas?

Answer 3

1) Trust Property- it must be clear the property that the trustee is to be held
The items must be clearly defined, for example, it cannot be ‘half the bottles of wine in my wine cellar’

2) beneficial entitlement- may be certain what property is being held, how is it being held?

Case law is really trying to make the wording fit, but still fair, so that it does not fail.

Question 4

What are fixed trusts?

Answer 4

Trustee has no discretion as to distribution, has a fixed mechanism for distribution, but can be coupled with a power.

Question 5

What is a discretionary trust?

Answer 5

Also known as a trust power- must be exercised- power is held by trustee.

Question 6

What is a power of appointment

Answer 6

Power may be exercised, can be trustee or third party, attached to a gift or trust.

Question 7

What is a certainty of object?

Answer 7

This is defining who the beneficiaries of the trust is. I,e can the trustees make a complete list of the objects at the date when they need to distribute?

Under a discretionary trust and powers, can a trustee say whether a person is or is not within the class of object? i,e ‘my children’ or ‘my friends’

Question 8

What is the consequence of uncertainty?

Answer 8

no transfer of legal title- no change in beneficial ownership unless all three certainties satisfied

Legal title transferred- If no certainty of intention, presumption of resulting trust applies. If clear intention for transferee to be trustee, automatic resulting trust arises if there is uncertainty as to either subject matter or objects.

Testamentary- no certainty of intention: gift
Uncertainty as to subject matter or objects: trust fails and property falls into residue