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Trusts 1 Flashcards

1
Q

Beneficial entitlement: Fixed Trust

A

Entitlement fixed by settlor, trustees have no discretion
Settlor cannot direct trustees after trust has come into effect (unless they have reserved power)
sole/divided in shares for multiple Bs
Beneficiaries have equitable interest in trust property

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2
Q

Fixed trust: Successive interest

A

Common: Life interest trusts (life tenant Beneficiary receiving income in their lifetime + remainder man (other Bs) entitled to capital after life tenant’s death)(A lives in house for life, on death given to their children (can’t be left to anyone else))

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3
Q

Discretionary trusts

A

Trustees have distributive discretion (must distribute)
(settlor determines objects (Bs), trustees decide who from within that received what sum)
Objects have no equitable interest in trust property until decided by trustee, do have right to ensure trust administered properly

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4
Q

Power of appointment (not trusts, but trusts include powers)

A

Right to choose who receives property from objects
Donee w/ power of appointment has complete discretion - can choose whether to exercise/who benefits
Fiduciary Power- any given to trustee (must periodically consider whether to use but doesn’t have to use)
Personal power - not trustee, don’t have to consider using
Objects of power have more limited rights than objects of discretionary trust
Donor must make clear what will happen if not exercised (gift over)

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5
Q

Power of appointment or discretionary trust?

A

Imperative wording (must)- discretionary
Permissive (may) - power
Discretion given to 3rd party (not trustee)- power
Gift over- power (no gift over- not determinative)
can have fixed trust + power (no need to exercise power but option there)

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6
Q

Vested interest

A

Current entitlement to property
in possession- to current enjoyment (life tenant/income B)
in interest- to future enjoyment (will vest in possession in the future)(remainder man/capital B)

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7
Q

Contingent interest

A

Conditional upon occurrence of future event (then vests)
Gift over indicative (if none, can still be contingent interest with word ‘if’, remainder interest returns to settlor on resulting trust if not fulfilled)

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8
Q

Capital -> Income

A

Land -> Rent
Bank account -> Interest
Shares -> Dividends

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9
Q

Sole Beneficiary : contingent interest- hold house until 21

A

vested interest in capital (will vest in possession for house at 21)
capital carries intermediate income, available when 18 (where no other B has prior income interest)

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10
Q

Sole Beneficiary: absolutely entitled

A

If B an adult, receives income from capital as it arises

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11
Q

Saunders v Vautier Rule

A

Sole adult beneficiary of sound mind with a vested interest in the trust property is entitled to direct the trustee to transfer legal title to them/3rd party, ending the trust early.
Absence of gift over indicated settlor didn’t want TP to pass to anyone else.

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12
Q

Saunders v Vautier: multiple beneficiaries

A

Simple fixed trust- each B can sever their share of capital w/o affected other Bs interest
unless property on trust- can’t sever shares as can’t divide
More complex trusts- all Bs are adults of sound mind agreeing to collapse the trust (and agreeing on how to share) (including contingent interest Bs incl gift over and discretionary trust objects- unlikely to gather all)

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13
Q

Legal limitations on Saunder v Vautier

A

Cannot use SvV to interfere with trust administration- either collapse the trust (and settle on new trust if desired) or leave trustees to carry out their duties

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14
Q

Express trust of land must satisfy s53(1)(b) LPA 1925 (only applies to land)

A

must be manifested and proved by some writing signed by person who is able to declare such trust/by his will
declaration and writing don’t need to be contemporaneous (order irrelevant)
writing - settlors intention to create the trust + terms of the trust
settlor signature (unless court allows trustee)
must be validly executed will (s9 Wills Act 1937)

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15
Q

Non-compliance with s53(1)(b) LPA 1925- express trust of land

A

Valid but unenforceable trust until done. If never done, remains unenforceable subject to anything making it unconscionable to deny the beneficiary’s interest (proprietary estoppel/constructive trust)
If trustee receives land to hold on trust w/o writing + settlor unable/unwilling to provide- trustee should seek court’s direction

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16
Q

Constitution required to create an express trust (linked to certainty of intention)

A

Transfer of legal title from one party to another
Transfer on trust - legal title must be vested in trustees (constituting trust)
Gift from donor to donee- transfer of legal title needed
Self-declaration of trust - transfer not needed, as legal title already vested with settlor (automatically constituted)
makes disposition irrevocable (settlor has no interest)

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17
Q

Testamentary trust constitution

A

Constitution takes place in will, personal reps obtain legal title to testator’s estate then transfer to recipients
If personal reps also trustees (already have legal title- hold it as trustees)

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18
Q

Inter vivos constitution

A

Transfer on trust- legal title must transfer from settlor to trustee
Gift- legal title must transfer from donor to donee
Choses in action (debts, bank £)- notice in writing to debtor/bank, title passes when notice receives
Chattels (cash)- deed of gift/delivery of chattel+ evidence of intention to transfer
Cheques- to 3rd party (not named payee) by signing name on back

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19
Q

Failed constitution- Milroy v Lord

A

Trust is void- equity will not assist a volunteer/perfect imperfect gift/ treat failed gift as self-declaration of trust
imperfect gift- donor can change mind
transferor must do everything necessary to effect intended transfer
if legal title has not vested in the intended recipient disposition will fail

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20
Q

Exceptions to Milroy v Lord

A
  1. Re Rose
  2. Unconscionable principle
  3. Fortuitous vesting
  4. Donationes mortis causa
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21
Q

Re Rose

A

Legal title held on constructive trust for the recipient (pending registration of legal title)- they have equitable interest provided
1. correct method of transfer used
2. transferor has done everything within their power to effect the transfer
3. doc ends up in hands of person capable of effecting the legal transfer (company’s registrar )

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22
Q

Mascall v Mascall

A

extends Rose to registered land (2nd limb of doing everything within their power unnecessary if transferor has put the matter beyond their control- makes it irrevocable (not given to agent, but donee))
constructive trust for donee

23
Q

Pennington v Waine

A

Perfection of gift where unconscionable to resile (focus on conduct of donor + their wish, also reliance)

24
Q

Fortuitous vesting (Strong v Bird)

A

Continuing intention to make an immediate gift to the intended donee who becomes executor/administrator./one of several of their will
becomes donor’s personal representative -> obtains legal title

25
Q

Donationes mortis causa

A

Donor doesn’t have time to make valid will
Donor must:
1. Contemplate/anticipate imminent death
2. Express intention that gift is conditional on their death
3. Part with dominion of the property (chattel- item, deeds, control)

26
Q

Equitable proprietary interest

A

Can be enforced against everyone except a purchaser of a legal interest who does not have notice of the trust.
B has priority over unsecured creditors in event of trustee’s bankruptcy/insolvency.

27
Q

Trustee acts a principle in their transactions with third parties

A

cannot commit B to third party contract

28
Q

Beneficiaries have proprietary and personal rights

A

creditor - just personal
person interested in deceased’s estates- personal right against executor
bailor- legal proprietary interest - can be enforced against everyone (unlike equitable proprietary interest- purchaser of a legal interest without notice)

29
Q

Self-declaration of trust

A

Settlor becomes trustee
retains legal title (but in new capacity)
new equitable title created
Beneficial ownership transferred to beneficiary

30
Q

Transfer on trust

A

Settlor transfers legal title to 3rd party trustee
Settlor has no interest
New equitable title created
Beneficial ownership transferred to beneficiary

31
Q

Requirements for creation of express trusts

A

3 certainties (intention/subject/objects)
Beneficiary principle (apart from purpose trusts)
Perpetuity
Formalities - declaration and constitution
Registration

32
Q

Trusts arising by operation of law (Implied)

A

Resulting trusts (automatic + presuming)
Constructive trusts correct unconscionability (institutional/as remedy/common intention)
Statutory trusts (intestacy)

33
Q

Resulting trust

A

Where legal owner has transferred ownership of property to 3rd party but equity recognises that they should retain/regain a beneficial interest

34
Q

Institution constructive trust

A

Where beneficial interest can’t be denied- imposed automatically after qualifying event (prevent fraud, perfect an imperfect gift/trust)

35
Q

Constructive trusts as a remedy

A

Successful proprietary estoppel claim
Fiduciary makes a personal profit in breach of no-profit rule
At the end of the tracing process, after breach of trust/fiduciary duty

36
Q

Common intention constructive trusts

A

beneficial ownership of land of unmarried cohabiters

37
Q

Certainty of intention

A

intention to impose/assume duty of the trust (more than desire)
objective: words and conduct and their context- fact specific
use of word trust inconclusive + vice versa - look at substantive rights and duties created
earmarking assets (separate bank acct.)- good evidence of intention but inconclusive
if objects/subject vague, sign of lack of intention

38
Q

Sole bank account as joint: Paul v Constance

A

trust found - ‘this money is as much yours as mine’, both paid in and out, didn’t know to use specific word trust

39
Q

Certainty of subject matter

A

Trust property requirement (must be identifiable, specified unless intangible, fungible- shares)
Beneficial entitlement requirement (ascertain nature + extent of beneficiary’s interest)
Reasonable income- can form a trust (objective yardstick depending on facts)

40
Q

Certainty of objects

A

Important so court can regulate/enforce the trust

41
Q

Test of certainty of objects for fixed trusts: complete list test

A

It must be possible to draw complete list of all beneficiaries.
Requires both conceptual (clearly defined) and evidential certainty (evidence enabling trustees to identify objects) (must do exactly as settlor instructed)

42
Q

Test of certainty of objects for discretionary trusts + fiduciary powers : is/is not test

A

Must be able to say with certainty whether any given individual is/is not a member of the class of objects
Requires conceptual certainty- class must be defined
Some evidential certainty allowed- Claimant must be able to prove they are in class

43
Q

Administrative unworkability

A

Discretionary trust can fail if class too wide (all residents of London)
Fiduciary power cannot fail due to this- no obligation to survey class- as long as it passes is/is not test - must be able to exercise their power properly

44
Q

Consequences of uncertainty : inter vivos trust

A

If no transfer of legal title, no change in beneficial ownership unless all 3 certainties met.
If legal title transferred-
- no certainty of intention -> resulting trust.
- subject matter/object matter uncertainty- automatic resulting trust if clear intention for transferor to be trustee

45
Q

Consequences of uncertainty: Testamentary

A

No certainty of intention: gift
Uncertainty of subject matter/object- trust fails, property goes to residue

46
Q

Statutory rule against remoteness of vesting (trusts with people/charities as object)

A

Statutory perpetuity period : 125 years. Must vest in person/charity at the end of that period.
Wait and see rule- don’t need to make 125 years clear at outset.
Class closing rules at end of 125 years (exclude objects otherwise causing trust to fail as their interest vests outside of this period)
Set out what happens/if not - resulting trust for settlor/their estate

47
Q

Non-charitable purpose trusts: common law rule of inalienability

A

Common law perpetuity period: 21 years, must be clear from outset (no wait and see), can be extended by reference to a life in being (Royal lives clause)
Express perpetuity clause needed

48
Q

Exception to beneficiary principle: Charitable purpose trusts

A

Enforced by Charity Commission (+AG)
More flexibility on certainty of objects (charitable intent vital)
No limit on duration
Cy-près- allows TP to be applied even if trust fails
Tax benefits
Must:
Charitable purpose + satisfy public benefit test + be wholly and exclusively charitable (if non-charitable part ancillary, it can be severed/remains effective)

49
Q

Non-charitable purpose trusts- Endacott exceptions

A

No enforcement- trusts of imperfect obligation
Court requires certainty of object (clear purpose + means)
21 year common law perpetuity express clause (can be extended by ref. to person)
1. Maintenance of particular animals
2. Erection and maintenance of monuments and graves
3. Saying of private masses
(class cannot be extended by analogy)

50
Q

12 heads of Charity (s3.1 Charities Act) + be for public benefit

A
  1. Poverty (going short, relative, temporary, not for rich, inferred)
  2. Education (scholarships, student unions, dissemination of knowledge, museums)
  3. Religion (advance it)
  4. Health/saving lives
  5. Citizenship/community development (volunteering)
  6. Arts/culture/heritage/science
  7. Amateur sport
  8. Human rights/conflict resolution, racial/religious harmony, equality and diversity (not changing the law)
  9. Environment (evidence that it’s worthy of conservation)
  10. Needy (youth, age, sick, disability, financial hardship, other disadvantage)
  11. Animal welfare
  12. Armed forces/police/fire/rescure/ambulance
    General charitable purpose too- evolving heads
51
Q

Charitable purpose trusts- public benefit

A

No presumption, must be proven.
Charity Commission guidance.
Must not be restricted to a private class of individuals (depend on their relationship to an individual/employer, cloistered nuns don’t advance religion)
Can charge for services but not restrict poor with fees.

52
Q

Cy-près doctrine

A

Charitable purpose trust fails -> funds applied to another charitable purpose by scheme of Charity commission
If purpose fulfilled/impossible, objects no longer relevant/suitable
subsequent failure- no resulting trust
initial failure- cy-près if general charitable intention

53
Q

Non-charitable trusts are unenforceable

A

But court can grant a Pettingall order, securing enforcement - requires trustee to give undertaking to comply (if not testator’s residuary legatees can sue)

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