TL Flashcards
Which of the following statements about the certainty of intention is true?
* (A) The settlor’s intention must be shown in
writing.
* (B) The settlor must have the intention whilst they own the intended trust property.
* (C) The settlor must use language like “hope” or
“wish” to express their intention.
O (D) The settlor must intend that the trust take effect at some point in the future.
B
The settlor must have the intention to create the trust whilst they own the intended trust property. The settlor’s intention may be shown in writing or by their words or conduct. The settlor should not use language like “hope” or “trust” to show their intention, because precatory wording does not show an intention to impose a binding obligation on a trustee. The settlor must intend that the trust take effect immediately–not at some point in the future.
Which of the following descriptions of property shows a certainty of subject matter?
* (A) “‘The bulk of my property!”
* (B) “The painting which I expect to inherit from
my mother.”
* (C) “One of my houses in London.”
O (D) “25% of my shares in XYZ Ltd.”
D
A description of a fractional share of an intangible asset like company shares shows a certainty of subject matter. Descriptions like “the bulk of my property” and “one of my houses in London” are not sufficiently certain. There is no certainty of subject matter in an interest that the settlor does not yet have, such as the expectation of inheriting under a will.
Introduction to Trust
Certainty of Intention: The settlor must clearly intend to create a trust, demonstrated through written or spoken words or conduct. The use of precatory language, such as “hope” or “wish,” is not sufficient to establish a trust. The intention must be to create a trust at the time the settlor owns the property.
Certainty of Subject Matter: The trust property must be clearly defined. For intangible assets like shares, fractional shares can be the subject of a trust, but for tangible assets, the specific portion must be physically segregated. Future assets or expectations, like an inheritance, cannot be the subject of a trust. The beneficial interests of the beneficiaries must also be clear.
Certainty of Objects: The beneficiaries of the trust must be sufficiently defined. For fixed trusts, where the trustee has no discretion over the distribution, a “Complete List Test” is applied, requiring a complete list of beneficiaries to be identifiable. For discretionary trusts, where trustees have discretion over the distribution, the “Given Postulant Test” is applied, requiring that it must be possible to determine whether any given individual is a member of the class of beneficiaries.
If any of these certainties are missing, the trust will not be valid. In such cases, the law may imply a resulting trust in favor of the settlor or the settlor’s estate, meaning the property reverts to the settlor or their successors.
- What is a trust and what does it entail?
Answer: A trust is a legal relationship where a trustee holds specific property for the benefit of others, known as beneficiaries. It involves a fiduciary duty where the trustee must act in good faith and manage the assets for the beneficiaries’ benefit.
- What are the two main categories of trusts?
Answer: The two main categories of trusts are express trusts and implied trusts.
- Could you provide an example of an express private trust?
Answer: An example of an express private trust is when a settlor clearly states their intention to establish a trust during their lifetime or through their will.
- What are the three certainties required for a valid express private trust?
Answer: The three certainties are:
Certainty of intention
Certainty of subject matter
Certainty of objects
- What is precatory wording and why is it problematic in trust creation?
Answer: Precatory wording refers to words indicating a hope, wish, or suggestion by the settlor regarding the trust property. It is problematic because it lacks the clarity required for certainty of intention in trust creation.
- What does certainty of intention entail?
Answer: Certainty of intention means the settlor must clearly indicate their intention to create the trust, typically before transferring the intended trust property to the trustee.
- Explain certainty of subject matter and provide an example of its significance.
Answer: Certainty of subject matter requires a clear description of the property subject to the trust. For instance, in a trust relating to land, the land should be clearly identified to avoid the trust’s failure.
- What is the Complete List Test and when is it applied?
Answer: The Complete List Test is applied in fixed trusts to determine certainty of objects. It requires the ability to produce a complete list of each and every beneficiary. If this cannot be done, the trust will fail.
- How does certainty of objects differ between fixed and discretionary trusts?
Answer: For fixed trusts, both conceptual and evidential certainty of objects is required, whereas for discretionary trusts, conceptual certainty is necessary, but evidential uncertainty will not cause the trust to fail.
- What is the beneficiary principle, and why is it significant in trust law?
Answer: The beneficiary principle states that a trust must have ascertainable human beneficiaries who can enforce the trust. This principle is significant because trusts for purposes rather than specific people will fail.
Let’s make sure you heard these rules correctly. What is the minimum and maximum number of trustees a trust may have?
* (A) 2-4
O (B) 2-6
* (C)1-5
* (D) 1-4
* (E) any number
(E) is correct: any number. It is only a trust of land which must have between two and four trustees.
A trust of land must have
O (A) 2-4; must be in writing
O (B) 2-6; may be oral or in writing
O (C) 1-5; must be in writing
* (D) 1-4; may be oral or in writing
(A) is correct. A trust of land must have 2-4 trustees and must be in writing.
True or false?
The fortuitous vesting rule (also known as the rule in Strong v Bird) applies when a trustee dies before the trust is properly constituted and the settlor becomes the trustee’s personal representative.
* (A) True
* (B) False
It’s false. The fortuitous vesting rule applies when a settlor (not a trustee) dies before the trust is properly constituted and the intended trustee becomes the settlor’s personal representative. The intended trust property then passes to the trustee, and the trust is considered validly constituted.
Is the following trust valid? Why or why not?
Rose transfers her shares to Leah, and Rose tells Leah that she hopes Leah will hold them on trust for Rose’s relatives.
The trust may not be valid because Rose’s statement of hope does not constitute a definitive trust obligation, lacking the necessary certainty of intention to create a trust.
SECRET TRUSTS
SECRET TRUSTS
Beneficiary must prove terms of trust by clear and convincing evidence
* Timing of communication to trustee irrelevant
* Trust fails if trustee fails to accept it or did not know about it until after settlor’s death
FIXED TRUSTS
FIXED TRUSTS
Specific interest of each beneficiary clearly defined
Choose whether each statement describes a secret trust
(A) or a half secret trust (B) by writing the correct letter next to each statement.
1. The trust is not revealed in the will. fill in blank
2. The beneficiary’s identity is communicated to the trustee at the time of or before the making of the will. fill in blank
3. The trust is declared in the will, but the beneficiary is not identified. fill in blank
4. The timing of the communication to the trustee is irrelevant to the validity of the trust. fill in blank
A
B
B
A
VESTED INTEREST
VESTED INTEREST
No conditions attached to interest
CONTINGENT INTEREST
CONTINGENT INTEREST
Condition attached to interest
LIMITED INTEREST and ABSOLUTE INTEREST
LIMITED INTEREST
No right to trust capital
ABSOLUTE INTEREST
Right to capital and income
Match each type of interest with its description by typing the corresponding letter next to each statement.
A - Absolute interest
B - Contingent interest
C - Limited interest
D - Vested interest
- The interest has no conditions attached.
- The interest has conditions attached.
- The interest does not include the right to the capital of the trust.
- The interest includes the right to the capital of the trust.
1.D
2.B
3.C
4.A
MIXED TRUST
MIXED TRUST
Includes fixed and discretionary aspects
RULE IN SAUNDERS V
VAUTIER
RULE IN SAUNDERS V
VAUTIER
Beneficiaries can terminate trust if they
* Together have absolute interest
* Are adults and of sound mind
Question 1: What are implied trusts, and how do they differ from express trusts?
Answer: Implied trusts arise without an expressed intention from the settlor to create a trust, but equity law implies a trust to achieve a fair outcome. This is different from express trusts, where the settlor explicitly states an intention to create a trust.
Match each situation with the types of interest it contains, by typing the corresponding letter of the situation next to the interest type. Note that both situations could contain the same type of interest, in which case you should type both letters together with no spaces.
(A) Tony’s will leaves £50,000 on trust for each of his three children upon them reaching the age of 21.
(B) Tony’s will leaves £500,000 on trust for his wife, Natasha, for life, and thereafter to his three children in equal shares.
- Contingent interest
- Vested interest
- Limited interest
- Absolute interest
- Interest under a fixed trust
A
B
B
AB
AB
Question 2: What is a resulting trust, and under what circumstances can it arise?
Answer: A resulting trust is implied by law based on the presumed intention of the settlor in situations where no explicit intention to create a trust has been stated. It can arise in two main situations: (1) following a voluntary transfer of property or when property is purchased in the name of another person, and (2) upon the failure to exhaust the beneficial interest under an express trust.
Question 3: Can you provide an example of a resulting trust arising from a voluntary transfer?
Answer: Yes. If a person transfers their house to a friend without any explicit compensation or explanation for the transfer, equity will presume the transferor did not intend to make a gift. The friend is presumed to hold the house on a resulting trust for the transferor, who can request the property back.
Question 4: How do purchase money resulting trusts work?
Answer: Purchase money resulting trusts arise when property is bought in one person’s name but the purchase price is entirely or partially paid by another. Equity implies a resulting trust where the person who contributed to the purchase price is considered to have an equitable interest proportional to their contribution.
Question 5: What are the criteria for a purchase money resulting trust to arise?
Answer: For a purchase money resulting trust to arise, the contributed sum must
be used to purchase the property, the contribution must occur at or before the title transfer, and the claimant must provide clear evidence of their contribution towards the purchase price.
Question 6: What is the presumption of
advancement, and when does it apply?
Answer: The presumption of advancement occurs when equity presumes a gift was intended in certain relationships, such as between husbands and wives, fathers and children, or persons in loco parentis and their wards. This presumption can override the presumption of a resulting trust unless clear evidence to the contrary is provided.
Example Question: Suppose Alex transfers a piece of property to their friend Jamie without any stated reason or compensation. How might equity law interpret this transfer?
Answer: Equity law might presume a resulting trust, assuming Alex did not intend to make a gift to Jamie. Therefore, Jamie would be considered to hold the property on trust for Alex, who retains an equitable interest and can request the property back, unless Jamie can provide evidence to rebut this presumption, such as showing that a gift was indeed intended.
Alice purchases a house for her friend Brian. She provides all the purchase money, but the legal title is in Brian’s name only. What is generally presumed?
O (A) Alice holds the legal title of the house on
resulting trust for Brian.
* (B) Brian holds the legal title of the house on resulting trust for Alice.
* (C) Alice’s purchase of the house was a gift to
Brian.
* (D) Brian owes repayment of the purchase
money to Alice.
(B) is correct. When a person provides the purchase money for property, but the legal title is transferred to another person, the general presumption is that the other person holds the legal title on resulting trust for the purchaser.
RELATIONSHIPS THAT
TRIGGER PRESUMPTION OF ADVANCEMENT
RELATIONSHIPS THAT
TRIGGER PRESUMPTION OF ADVANCEMENT
* Husband/fiancé to wife/fiancée
* Father to child
. Person in loco parentis to
recipient
True or false?
When the presumption of advancement applies, it is presumed that the person who provided the purchase money or made the voluntary transfer intended for the other person to hold the property on resulting trust.
* (A) True
O (B) False
False. When the presumption of advancement applies, it is presumed that the person who provided the purchase money or made the voluntary transfer intended to make a gift to the other person.
EVIDENCE TO REBUT
PRESUMPTIONS
EVIDENCE TO REBUT
PRESUMPTIONS
* Surrounding circumstances
* Acts or declarations made before or at time of transfer
Jas gives a rental property to his friend lan.
2. Jas gives his daughter, Simran, £50,000 towards the purchase of a house. The house is purchased in Simran’s name only.
3. Jas tells lan to hold shares on trust for Nisha, provided Nisha reaches the age of 25. Nisha dies at age 23.
- Will a resulting trust arise in the following situation?
Jas gives a rental property to his friend Ian.
- Will a resulting trust arise in the following situation?
Jas gives his daughter, Simran, £50,000 towards the purchase of a house. The house is purchased in Simran’s name only.
- Jas tells Ian to hold shares on trust for Nisha, provided Nisha reaches the age of 25. Nisha dies at age 23.
- Yes, a resulting trust is likely to arise in the situation where Jas gives a rental property to his friend Ian. Since there’s no explicit compensation or explanation for the transfer, equity law would presume Jas did not intend to make a gift to Ian. Ian is presumed to hold the property on a resulting trust for Jas, who retains an equitable interest in the property and can request its return, unless Ian can provide evidence to rebut this presumption, such as proving that a gift was indeed intended.
- In the situation where Jas gives his daughter, Simran, £50,000 towards the purchase of a house, and the house is purchased in Simran’s name only, the presumption of advancement is likely to apply rather than a resulting trust. The presumption of advancement applies when a parent, particularly a father, makes a transfer to his child. It presumes that the transfer was intended as a gift. Therefore, it is presumed that Jas intended the £50,000 as a gift to Simran for the house purchase, and a resulting trust is not presumed to arise in this case. Jas would need to provide clear evidence to the contrary to overcome the presumption of advancement and argue for a resulting trust.
- In the situation where Jas instructs Ian to hold shares on trust for Nisha, contingent upon Nisha reaching the age of 25, and Nisha dies at age 23, a resulting trust is likely to arise due to the failure of the contingent interest. Since Nisha did not meet the condition of reaching the age of 25, the express trust for her benefit fails. As a result, the shares would be held on a resulting trust for Jas, the settlor, and Ian, as the trustee, would be obliged to return the shares to Jas or his estate if Jas has passed away. This is because the specific condition attached to the trust was not fulfilled, and equity law dictates that the property reverts to the settlor or the settlor’s estate in such cases.
- True or false?
If legal title is registered in the name of both parties but there is no express declaration of trust, it is presumed that the parties’ equitable interests are joint and equal.
* (A) True
O (B) False
True. If legal title is registered in the name of both parties but there is no express declaration of trust, it is presumed that the equitable interests in the property, like the legal interests, are joint and equal.
