The three certainties Flashcards
What are the three certainties?
- certainty of intention
- certainty of subject matter
- certainty of objects
What is the certainty of intention?
It must be clear that the settlor, by their words or conduct, had the intention to create this trust
Does the word ‘trust’ need to be used?
No
What is certainty of subject matter?
The property subject to the trust must be described with sufficient certainty and also the beneficial entitlement of each beneficiary
Will ‘I leave the bulk of my residuary estate to John’ be sufficient?
No - it would not be a valid trust
The testator left two houses to his trustees to hold for his daughter Maria ‘whichever she may choose’ and the other to his daughter Charlotte. Maria died before making her choice. Will the trust be valid?
No, because Charlotte’s share was dependent on Maria’s choice so Charlotte’s interest was uncertain
Can a settlor create a trust of only part of their assets, such as part of their wine collection?
Yes but the tangible assets need to be clearly identified or there is no certainty of subject matter and the trust will fail
Do intangible assets need to be segregated to have certainty of subject matter?
No provided that the intangible assets are similar ie. shares
What is certainty of objects?
The trusts beneficiaries
What is a discretionary trust?
Trustees have the decision on whether or not to pay any member of a defined class of beneficiaries. The beneficiaries have no automatic right to payment, only the right to be considered by the trustees
What is a fixed trust?
When each beneficiary is entitled to a specific share of the trust property
What is the test for certainty of objects for fixed trusts?
It must be possible to compile a complete list of all beneficiaries - class ascertainability test
What is the test for certainty of objects for discretionary trusts?
The trustee must ask ‘can it be said with certainty that any given individual is or is not a member of the class’ - individual ascertainability test
What are the four important issues to remember when looking at certainty of objects?
- conceptual uncertainty
- evidential uncertainty
- administrative unworkability
- gifts to individuals answering a particular description: the one-person test
What is conceptual uncertainty?
Where the words used by the settlor to describe the beneficiaries are too vague for the courts to apply - such as ‘friends’. It renders the trust void
When is there no conceptual uncertainty?
- When the settlor uses phrases so the trustees can identify the class such as ‘facebook friends’
- When the settlor leaves the discretion to someone else to decide who falls into the group
What is evidential uncertainty?
If the trustees are unable to determine exactly who fits the description due to lack of evidence such as no records
Can evidential uncertainty be remedied or does it leave the trust void?
It can be remedied with extrinsic evidence
What is administrative unworkability?
A trust fails for administrative unworkability where the description used by the settlor is clear but the definition of the beneficiaries is too wide to form a class
What is the one-person test?
If a testator includes a bequest in their will where each beneficiary is entitled to a similar gift and the number of beneficiaries does not effect the size of each gift. Conceptual certainty is not required so long as at least one person meets the criteria
