Trusts 1 Flashcards
What are the 3 certainties (general)?
- certainty of intention
- externally manifested,
- take effect immediately
- clear words - certainty of subject matter
- clear of extent and nature of B’s interest - certainty of objects
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 beneficiary
- conceptual and evidential certainty - 2+ dependant on each other
- need complete list test
- includes in equal shares - 2+ not dependant on each other
- if one is certain and other is not then certain one still gets their share
What must be present for certainty of object for discretionary trusts?
- Must be able to carry out survey of class
- Is/Is not test
- conceptual certainty needed
- evidential to be provided by potential beneficiaries - Not Administratively unworkable
- ie “all people of London”
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
Requirement for trust in a will
- 3 certainties
- In valid will
- No need for constitution
If trust is not validly constituted can it still be valid
- Every Effort
- Testator has done everything in their power and it is now in hands of person able to effect transfer
- not if person is testators agent or if some approval is needed - Rule in Strong v Bird (fortuitous vesting)
- intention to make an immediate gift and remains unchanged until death
- intended donee becomes PR - Donatio Mortis Cause
- gift made in contemplation of death and there is a reason to believe death is imminent
- on condition of death (and they die)
- must have been transferred (can be constructive) - Proprietary Estoppel
- assurance is made
- donee relies on assurance and acts to their detriment
When is secret trust enforceable
Is when trust is not mentioned in will
Beneficiary must give evidence:
1. Trust existed
2. Terms communicated to trustee before death
- trustee did not refuse
If it fails
- then gift to trustee
When is half secret trust enforceable?
Is when it is mentioned in will but beneficiary is not disclosed
Enforceable only if:
- identify of beneficiary was communicated to trustee before or when will was executed
- language of will is consistent with this
If fails
- trustee hold it on resulting trust for estate
What enforcement action can beneficiaries take in 1. fixed trust 2. discretionary trust?
Fixed trust
- for breach of trust
- restrain improper exercise of trustees obligation
Discretionary trust
- breach of trust
- make trustee exercise discretion
What are the different interests in trusts?
Vested
- no condition attached
Contingent
- condition attached
Limited
- does not give capital
- normally limited in time
What happens if beneficiary has vested interest but is under 18? What if they die?
Held on trust till 18th birthday as minor cannot give good receipt
If they die it passes with beneficiaries estate
When does a minor have right to income from capital?
Must have a vested or contingent interest with no prior limited life interest
Cannot collect income as minor so added to capital
When can sole beneficiary exercise Saunders v Vautier rights?
One Beneficiary
- Sole adult beneficiary of sound mind,
- with vested interest in the trust property
- is entitled to direct the trustee to transfer legal title to them
Multiple with Distinct Interest
- if can be severed without effecting other beneficiaries
May need consent of prio life interest beneficiary
When can multiple beneficiaries exercise Saunders v Vautier Rights?
- all adults of sound mind
- share absolute beneficial entitlement
- can do in such shares as they choose
Consent
- discretionary trust: all beneficiaries
- contingent: of beneficiary of gift over
- successive: remainder man agrees (not if hypothetical)
