Trust 1: Express Trusts Flashcards
What are the 3 certainties (general)?
- certainty of intention
- certainty of subject matter
- certainty of objects
What are the requirements for certainty of intention?
- Intention must have been externally manifested at time the settlor owned the property and prior to transfer to another
- Settlor’s intent must be that the trust takes effect immediately, not some future date
- wording must be clear (can also be through conduct)
Can informal words or conduct show certainty of intention? Examples?
Yes words and conduct can show intention
- evidence can be difficult so witness, proof of conduct and words repeated over period of time may be helpful
Examples
- saying “money is as much yours as mine”
- Joint withdrawals from a bank account for joint use (could indicate joint beneficial ownership)
When would factional shares of subject matter fail/not fail?
Intangible/fungible Assets will not fail
- Eg 50% of shares
Tangible Assets will fail
- Eg half of wine bottles
How can certainty of subject matter be given?
- Must be possible to ascertain the nature and extent of beneficiaries interest in trust property
Wording
- bulk, net assets, favourite X etc. are not identifiable
- reasonable income is approved
Mechanism
- can give a mechanism to dived assets
- Ie. A choose who gets what or A gets first choice
- but if decision maker dies the trust fails
What must be present for certainty of object for fixed trusts? (one person, multiple independant, multiple dependant)
- Where f. trust has one beneficiary, and they are uncertain the trust will fail
Multiple Beneficiaries not dependant on others
- identifiable parties still entitled
- unclear parties entitlement will fail
Equal Distribution
- complete list test
- It must be possible to draw up a complete list of all the beneficiaries
- It follows that such trusts require both conceptual and evidential certainty.
What must be present for certainty of object for discretionary trusts?
- Trustees do not need to identify all of those people in order to exercise their discretion
- Rather must carry out a survey of the class which is appropriate to the particular trust
Is / Is not test
- requires a trustee to be able to say with certainty whether ‘any given individual is or is not a member of the class’
- conceptual certainty required
- evidential certainty must be shown by beneficiaries in order to be entitled
Exception
- Administrative unworkability
- Discretionary trusts can fail because the class of objects is too wide
Example of discretionary trust that is Administratively unworkable?
- Is void if class ‘is so hopelessly wide as not to form “anything like a class” so that the trust is administratively unworkable’.)
- Eg. “all residents of Greater London”
What happens if a trustee dies, refuses to take office etc.?
- Trust will not fail if trustee dies, refuses to accept appointment or resigns
- Court will appoint successor trustee
Trust will Fail for lack of trustee
- Lack of trustee at creation of trust may cause attempted inter vivos trust to fail
What are the requirements for being a trustee/ who cannot be a trustee?
Trustee can be anyone
- Capable of acquiring and holding property for their own benefit
- Can be private person, professional person, trust corporation
Cannot be:
- a minor
- lack mental capacity
How many trustees are required?
- no min/max number
Trust of Land
- must have at least 2 and up to max of 4
- because at least 2 are needed to give valid receipt for money received on sale of land
What are the rules against perpetuity for a normal trust
- Interest under trust is void if it does not vest within 125 years
- trust is void if interest is not certain to vest within period
What effect will failure of each of the 3 certainties have?
Void for uncertainty of intention
- Property passes as gift to person who would have been trustee
Void for uncertainty of subject matter
- Property reverts to settlor
Void for uncertainty of objects
- Resulting trust in favour of settlor or settlors successors presumed
What are the requirements for self declaration of trust vs transfer on trust?
Self Declaration
- Must demonstrate by word or conduct that they intend to be legally bound
- Once declaration is made they are bound and cannot retract
(- if trust of land must evidence declaration in writing and sign)
Transfer on Trust
- Settlor must transfer trust property to trustee in appropriate fashion (constitution); and
- Settlor must make declaration of trust (ie demonstrate by word or conduct the they intent trustee to be legally bound)
(- if trust of land must evidence declaration in writing and sign)
How should different trust property be constituted? (land, shares, chattels, bank account)
Land
- Transfer deed
- Registration at HMLR (normally by transferee)
Shares
- Donor to sign stock transfer form
- Registered with company (by either)
Chattels
- Owner must have intention to transfer chattels and must deliver them to recipients
- Alternatively can be done by deed
Bank Account
- Must provide signed, written notice of transfer to bank
What happens if trust is not properly constituted?
- If trust property is not vested in the trustee the trust in incompletely constituted and is therefore void
- equity follows the law
- subject to exceptions
What is the every effort test?
- Where transferor has done everything in their power
- So used correct method, done everything in their power, and it is now in the hands of someone capable of effecting the legal transfer
Exception
- Does not apply where gave documents to own agent
- If consent is still needed somehow
What is fortuitous vesting?
- Must be an intention to make an immediate gift (not future intention)
- Intention must continue until donors death (remains unchanged)
- Intended done/trustee becomes an executor (or one of) / or administrator of donors estate
What is Donatio Mortis Cause?
Applies where: a gift is made in contemplation of death
- Donor delivers property to done while in contemplation of death (no if they had no reason to think it was imminent);
- With intention that the property be given to done if donor dies (on condition of death)
- Donor dies
Delivery can be constructive ie. giving key to safe with the deeds to the house (but not enough to give keys to the house)
What is Proprietary Estoppel to perfect imperfect gift?
Gift may be complete if done can prove that
- They relied on assurance; and
- Therefore have acted to their detriment
What are the general requirement for the creation of a testamentary trust?
- Contained in valid will (including all terms)
- 3 certainties
- No need for transfer (done by executor)
(secret and half secret trusts are an exception)
When is a secret trust enforceable? / When might it fail?
Beneficiary must:
- Prove the terms of trust by clear and convincing evidence; and
- Communication describing trust to trustee can be made at any time before death
Will fail if:
- If legatee (trustee) refused to accept trust (must be communicated)
- If legatee did not know of intended trust until after death
- If legatee knew but failed to respond acceptance is presumed
- trustee then keeps property as gift
When is a half secret trust enforceable? / When might it fail?
When mention in will but beneficiaries identity is secret
Enforceable
- If beneficiaries identity was communicated to trustee at or before making of will; and
- Language of the will is consistent with such communication
Fails if
- identity communicated to trustee after will was made
- trustee holds property on resulting trust and it passes to estate residue
What is the effect of a fail secret and half secret trust?
Secret
- trustee keeps property as gift
Half Secret
- trustee holds property on resulting trust and it passes to estate residue
What happens if a condition in a contingent interest is not met?
- usually then held on resulting trust for residue estate
What enforcement action can beneficiaries take in fixed trust?
- failure of trustees to perform obligations can be enforced by beneficiaries
- beneficiary has right to receive what is given to them and has right to restrain improper exercise of trust obligation
What enforcement action can beneficiaries take in discretionary trust?
Each member of class has right:
- to see the trust enforced by asking that trustee exercise their discretion; and
- to sue trustee for breach of trust
What is the Rule of Saunders v Vautier - can one beneficiary do this just for their share
Beneficiaries can terminate trust if:
- all are adults and sound of mind;
- all agree
- all have absolute interest (together)
Severable Trust
- If each beneficiary has a distinct interest in trust property, which can be severed without impacting the others
- They can each separately exercise this right
