Trust Creation

Question 1

How are trusts created? Deed

Answer 1

Using a Deed is the usual method;

• Settlor executes deed giving legal ownership of property to trustees for benefit of beneficiaries
• Deed states trust property, names of trustees and their powers, names of beneficiaries and their rights
• If transfer made by deed of assignment this should be correctly done, i.e. signed by settlor and trustees and independently witnessed

Question 2

What different types of trust could be made under a will?

Answer 2

1. Express Trust - Expressly stated in terms of will eg. written in a will.
2. Implied trust due to property being left to minor
3. Life interest trust set up as a result of a will = immediate post-death interest (IPDI trust)
4. Discretionary trust may be set up to use nil rate band (NRB) (less common now NRB transferable)

Question 3

Trusts written into wills - need to knows

Answer 3

• Trust written into a will does not take effect until after death (and then only if will is still valid at that time)
• Assets placed into will trust once the estate has been administered
• A will can be revoked by the testator (person who made the will) by
  1. physically destroying it / making a new one which includes a term that previous wills are revoked
  2. on marriage (unless will states it is made in contemplation of that marriage, in which case it stands)

Question 4

How are trusts created? Statute

Answer 4

• Administration of Estates Act 1925 s.33
  o Trust for sale over intestate’s estate
  o Modified by Trusts of Land and Appointment of Trustees Act 1996 - Personal reps now have power, but not a duty to sell
• Law of Property Act 1925
  o s.34 Land conveyed in undivided shares as tenants in common vests in the first 4 named in conveyance
  o s.36 Property held as joint tenants is held on trust
• Trusts of Land and Appointment of Trustees Act 1996
  o Land held for minor held on trust
• Married Women’s Property Act 1882

Question 5

How are trusts created? Court order

Answer 5

• Constructive trust is imposed by law where it is unfair for the legal owner to keep beneficial interest
  o If claim an interest in land you do not own
  o Arise from divorce/breach of trust

Question 6

What is a fully secret trust?

Answer 6

A secret trust hides the identity of recipient (legatee) of property from deceased’s estate

Fully secret trust;
o Does not appear in will
o Testator must communicate to apparent legatee that property is subject to fully secret trust
o Communication can be made at anytime in testator’s lifetime and either before or after date of will
o Terms of trust must be clearly communicated (can be in a sealed letter)
o Testator must communicate legally binding obligation on legatee and legatee must accept fully secret trust
o Trust fails if not communicated to legatee
during testator’s lifetime, takes effect as beneficial gift instead

Question 7

What is a half secret trust ?

Answer 7

o Terms of will state legatee will hold property on trust but terms of trust are not disclosed
o Details must be communicated to legatee before will is executed or it will fail
o If it fails trustees will hold property for those entitled to residue / intestacy