Trusts 1 Flashcards
What is a trust?
A fiduciary relationship, arising in equity in which:* a trustee holds legal title to specific property under a duty to manage, invest, safeguard, and administer the trust assets and income * for the benefit of designated beneficiaries, who hold equitable title.
What are the two main types of trusts?
Express and Implied
What is an express trust?
Express trusts are created by the express intention of the settlor (i.e. the creator of the trust).* A settlor may create a trust in their lifetime (inter vivos), either by declaring themselves trustee of specific property the settlor owns, or by transferring property to one or more trustees to hold on trust. * Alternatively, a settlor may create a testamentary trust by declaring it in their will. Express trusts may be classified according to the nature of the beneficial interests they create (i.e. private or charitable).
What are the two types of express trusts?
Private and Charitable
What is a private trust?
Private trusts are express trusts created for the benefit of certain ascertainable persons and are either fixed, discretionary, or purpose trusts.
What are the three types of private trusts?
Fixed, Discretionary and Purpose
What is a fixed trust?
A fixed trust is an express, private trust which exists:* where the interests of the beneficiaries are defined by the settlor* and trustees have no freedom as to how trust property is to be distributed between beneficiariesExample: “to T on trust for my husband for life, and at his death to my children in equal shares”.
What is a discretionary trust?
A discretionary trust is an express, private trust in which: * the trustee is given discretion in how to distribute the trust property, * usually among the members of an identifiable classExample: “to T on trust for my children in such shares as T shall in his absolute discretion decide”
What is a purpose trust?
A purpose trust is an express, private trust set up for a purpose rather than for people. * Purpose trusts fall into two categories: trusts for public purposes, otherwise known as ‘charitable trusts’, and trusts for private purposes, known as ‘noncharitable purpose trusts. * Note, a trust for a private purpose which does not have defined beneficiaries will normally fail, but there is a limited class of private purpose trusts, sometimes known as ‘honorary trusts’, which are recognised as valid (e.g. trusts for the maintenance of particular animals).
What is a charitable trust?
A charitable trust is a type of express, purpose trust. * Unlike a typical private trust, a charitable trust is created for the benefit of an indefinite class of persons or the public in general e.g. a trust providing scholarship funds for needy students at a named university is considered a charitable trust.* Such a trust must fall within the recognised heads of charity in order to be valid.
What is an implied trust?
A trust is implied in equity where the intention of the settlor is not expressed, but a trust is presumed in order to ensure that an equitable result is achieved. There are two main categories of implied trust: resulting and constructive
What are the two types of implied trusts?
Resulting and Constructive
What is a resulting trust?
A resulting trust is implied by law based on the presumed but unexpressed intention of the settlor when: * an interest under an express trust fails, * an express trust fails to exhaust the beneficial interest, or * a person makes a voluntary transfer or purchase in the name of another. The beneficial interest reverts to the settlor or the settlor’s estate.
What is a constructive trust?
A constructive trust is an equitable remedy imposed by a court to prevent an unjust enrichment of one person at the expense of another as the result of wrongful conduct, such as fraud, undue influence, or breach of fiduciary duty such as when a third party receives trust property with knowledge of a breach of trust.
