Trust Rules

Question 1

Trust rules - What are the three certainties?

Answer 1

Knight vs Knight 1840 established there must be three certainties present for a trust to be valid:

 words – must unmistakably show that a trust is intended
 subject matter – must be certain with property clearly identified
 object must be certain – i.e. the beneficiaries
o they can be named
o described as a class
 wording should be precise capable of legal definition e.g. wife, civil partner
 NB. children includes illegitimate and adopted children but not step-children
o does not apply to charitable trusts

Question 2

Perpetuities and Accumulations - what is this?

Answer 2

Law deems it against public policy for property to be settled into a trust indefinitely.

Perpetuity laws prevent this from happening.

Question 3

What are the main aspects of the Perpetuities and Accumulations Act 2009?

Answer 3

• It applies to Trusts created on or after 6 April 2010
• It introduced a 125 year perpetuity period ( this overrides trust deed - applies regardless) (s.5(1))
• No restriction on accumulation - trustees can accumulate income for duration of trust period (s.13) except for charities which is 21 years (s.14)
• Shorter term can be chosen and written into deed
• Existing trusts can write 100 year perpetuity period into deed if existing perpetuity period is based on a specified person or on a life who the trustees cannot easily establish if they are still living. This act is irrevocable. (s.12)

Question 4

What are the main aspects of the Perpetuities and Accumulations Act 1964

Answer 4

Perpetuity period either
o Lifetime of specified person plus 21 years;or
o Fixed period of 80 years from date trust created

Accumulation (Law of Property Act 1925) income could not be accumulated for longer than:

o Life of settlor
o 21 years from death of testator/settlor
o Duration of minority(ies) of anyone living at death of testator/settlor
o Duration of minority(ies) of anyone entitled under the settlement
o 21 years from date of disposition (trusts after 15 July 1964 only)
oMinority(ies) of anyone in being at that date(trusts after 15 July 1964 only)

If any of these are breached then the accumulation is invalid and income released to the person entitled to it.