TRUSTS Flashcards
Strong v. Bird (1874) / Legal Principle Established
Where a person intended to make a gift during their lifetime, but the gift was incomplete, the intention can still be perfected if:
- The intention to make the gift was clear and continued until the donor’s death.
- The donee becomes the executor (or personal representative) of the donor’s estate.
IMPLIED TRUSTS
- RESULTING TRUSTS:
a. an interest under an express trust fails
b. an express trust fails to exhaust the interest
c. the person makes voluntary transfer of purchase in the name of another - CONTRUCTIVE TRUST
to prevent unjust enrichment (fraud, undue influence, breach of fiduciary duty)
EXPRESS PRIVATE TRUSTS:
What is required to be formed
- CERTAINTY
a. of intention
b. of subject matter
c. of objects - TRUSTEE (Inter-vivos Trusts Only)
A testamentary trust will not fail for luck of trustee. - ASCERTAINABLE BENEFICIARIES
CERTAINTY OF INTENTION
Intent to take effect IMMEDIATELY
No precatory expressions (hope/ wish)
NO CERTAINTY OF INTENTION
Property - gift
Certainty of Subject Matter
- NO - the bulk of my estate
- YES - reasonable income
- YES Fractional Shares, unless it is tangible property - segregated from the rest
- Existing (not future property/contigent interest)
EXAMPLE Page 400
NO CERTAINTY OF SUBJECT MATTER
Trust is void, the property reverts to the settlor.
Certainty of Objects
(Beneficiaries)
Ascertainable Human beneficiaries
Concept capable of objective determination
FIXED TRUSTS:
Complete list- the beneficiaries need not be in existence. - Ascertainable by the time the interests are to come in enjoyment.
Conceptual certain + evidentially certain.
DISCRETIONARY TRUST: Given Postulant test
- Description of the class is clear -
no need for the whole range of potential beneficiaries to be ascertainable.
FAIL if administrative unworkable- The objects are too wide to form a class (capriciousness)= administratively unworkable. (Eg the inhabitants of the West Yorkshire)
No CERTAINTY OF OBJECTS
FIXED TRUST:
Trust fails
In such cases, the property held in the trust would revert to the settlor (the person who created the trust) or their estate. This is known as a resulting trust. The underlying principle is that if the trust fails due to the lack of beneficiaries, the property should go back to the person who created it.
- Exception: If beneficiary known but cannot be traced - Trustees apply to the Court for DIRECTIONS.
DISCRETIONARY TRUSTS:
A Resulting Trust on favour of the Settlor or the Settlor’s successors is presumed
Can the trust fail because the trustee dies, refuses to accept appointment or resigns?
NO.
CAN A MINOR BE A TRUSTEE?
Not in any event.
Beneficiaries can terminate trust under the rule in Saunders v Vautier?
- All the beneficiaries are adults and of sound mind.
- All the beneficiaries agree.
- All the beneficiaries have an absolute interest.
RULES AGAINST PERPETUITY
(6 April 2010) The insterest must vest within 125 years
remoteness of vesting
125 years
INALIENABILITY RULE
Non Charitable Purpose Trust:
- 21 Years
- Human Life plus 21 years
- Period assumed to be 21 years when no period is permitted.
CREATION OF INTER-VIVOS TRUSTS
a. Declaration of Self as Trustee (words or conduct)
b. Transfer property to another & Declaration that the transferee holds as trustee.
Declaration of Self as a Trustee for LAND
The declaration of trust must generally be made in writing to satisfy the requirements of the Law of Property Act 1925.
Under UK law, specifically the Trusts of Land and Appointment of Trustees Act 1996 (TLATA), a sole trustee can hold legal title to the land, but there are restrictions when dealing with the property, particularly when it involves the sale or transfer of the property.
The main issue is that a sole trustee cannot give a valid receipt for the purchase money when selling or transferring land. This is because the law requires at least two trustees (or a trust corporation) to provide protection to the buyer by ensuring that the sale is properly managed, and the proceeds are handled correctly.
So, while you can be the sole trustee of land, if you intend to sell or transfer the property, you would need to appoint at least one additional trustee to provide a valid receipt for the sale proceeds. This is to protect the interests of the beneficiaries and ensure proper management of the trust.
THREE REQUIREMENTS FOR A VALID DECLARATION OF TRUST
- CERTAINTY
- BENEFICIARY PRINCIPLE
- PERPETUITY
FORMALITIES OF TRUST
Personalty: No formal requirements
Land: Written Declaration of Trust (in all cases)
Formal Requirements for Transfer
Land: deed + registered at the Land Registry (by the transferee)
Shares: stock transfer form
Chattels: deliver to the recipient OR deed
Bank Account: Transfer notice to the bank
No formalities
incompletely constituted - Fails
EQUITY WILL NOT ASSIST THE VOLUNTEER Exceptions
1 Every Effort Test
(put the property outside the donor’s control) -> An imperfect gist is enforceable
not registered with the **Registry or Company **
2 Donatio Mortis Causa
a. Imminent death.
b. The donor delivers the property to the donee.
c. intention = to be given to the
d. the donor dies.
- Constructive Delivery will suffice (Key to the safe of jewlery.
3 Rule in Strong v Bird
Settlor dies before the transfer on trust is made.
Trustee becomes the PR on death. (If there is evidence that the donor changes their minds before die, the rule does not apply)
4** Proprietary estoppel**
(Reliance on Assurance + Acted to their detriment).
Every Effort Test: In Land or Shares where the transferor has executed d
EVERY EFFORT TEST - Trust of Land
A written declaration satisfies the requirement.
TESTAMENTARY TRUST
Formalities
A valid will
Secret Trust
Even if communication describing the trust was not made until AFTER the will was executed.
Fails if the legatee/trustee refuse or did not know UNTIL AFTER THE TESTATOR’S DEATH
(Not respond acceptance is implied)
SECRET TRUST
After the will was executed - OK
After Death - NOT
HALF SECRET TRUST
Identity was communicated to the trustee ON or BEFORE the making of the will.
DIFFERENCE BETWEEN Secret Trust and Half Secret Trust
SECRET: after will
HALF SECRET: on/before will
3 TYPES OF BENEFICIAL ENTITLEMENT
(How can the trustee distribute the property)
Fixed Trusts: no freedom how the trust property will be distributed
Discretionary Trusts: Trustees choose how to distribute the property
Mixed Trust: Both Fixed and Discretionary
Limited & Absolute
Limited = no right to the capital
DISCRETIONARY TRUST
Each beneficiary can seek an injunction to prevent a trustee from distributing the trust funds.
TERMINATION BY BENEFICIARIES - Saunders v Sautier
- All the beneficiaries are adults and of sound mind.
- All the beneficiaries agree.
- All the beneficiaries have an absolute interest.
FOR TH FIXED & DISCRETIONARY TRUSTS
RESULTING TRUSTS
No evidence before or at the time of the transfer
X provides purchase money but the property is transferred into Y’s name alone. - PRESUMPTION = Y hold legal title on a resulting trust for X.
X and Y both contribute purchase money = presumption Y holds on trust for X and himself in proportion to their respective contributions.
RESULTING TRUST - CONSIDERATION
- for purchase
at the time of before takes title.
-clear and convincing evidence
Can be rebutted: gift/repayment of debt/ loan was intended).
EXCEPTION = Presumption of advancement (father/ husband +fiance/ loco parentis)
- can be rebutted
Resulting trust. Window in which we can examine evidence:
Before or at the time of purchase or transfer
Resulting Trust: Evidence of Illegal and Fraudulent Motive
The court will decide whether it is in the interest of the public to allow the claim.
When a resulting trust arises from failure of an Express Trust?
Failure of a Contingent Interest
Lack of Certainty of Objects
Failure of Half Trust for Lack of Communication
TRUST OF FAMILY
Seperation of Couple who were cohabiting but were neither married nor in civil patrnership
The Court’s power is more limited.
What is required for an express trust of the family home
- agreement evidenced in writing
- Land Reg TR1 form has a section on it
agreement evidenced in writing
Land Reg TR1 form has a section on it
Own the property in equal shares
TRUST OF FAMILY HOME
Legal title to the property is the the sole name of one of the parties.
Non-owning party wish to claim a share by establishing that the non-owning party holds the property on trust for both parties.
Legal Title vs. Equitable Interest
Legal Title: This refers to the formal ownership of the property as registered with the Land Registry. Joint tenants of the legal title must always act together in relation to the property because they share one single legal interest.
Each joint tenant has an undivided share in the whole property.
Upon the death of one joint tenant, their share automatically passes to the surviving joint tenants through the right of survivorship. This applies both to the legal and equitable interests.
Equitable Interest: This refers to the beneficial interest in the property—essentially, who benefits from the property and how the property is distributed between the owners.
TRUST OF FAMILY
Joint tenants hold the legal title.
Do they also hold the equitable interest as joint tenants?
Equitable interests in the property do not have to be held the same as legal title.
They may hold equitable interests as joint tenants or tenants in common.
TRUST OF FAMILY HOME
Legal title in BOTH NAMES.
As to the EQUITABLE INTEREST, how can the trust be created?
Express Declaration of Trust:
A. If the declaration specifies that the property is to be held as ** joint tenants** in equity, the owners share the beneficial interest in equal undivided shares, and the right of survivorship applies. It does not matter whther the actual contributions were unequal.
B. If the declaration specifies the property is held as tenants in common, it will usually indicate specific shares (e.g., one party owns 60%, the other 40%), irrespective of the financial contributions to the purchase price (i.e. they may gave paid 20% and 80%)and no right of survivorship applies.
**No Express Declaration of Trust **
Equity follows the law (maxim)
PRESUMPTION Like the Legal interets, Equitable Interest is held as Joint Tenants
TRUSTS OF FAMILY HOME
Legal Title held as Joint Tenants.
What it the Presumption that applies to equitable interest, when there is no Express Declaration of Trust?
The equitable nterest is held as joint tenants.
However, a party can rebut the presumption.
No Express Declaration of Trust. What the court will look at to rebut the presumption?
cProving Common Intention:
-Advive they received at the point of purchase.
-Purpose of purchase of property
- motivation for purchasing property
- nature of relationship between parties
-Whether there are childer for which there is responsibility to provide a home.
-Arrangment of finances.
-Bills paid for property.
-The reason why One was authorised.
LEGAL TITLE in THE SOLE NAME OF one party.
What about the equitable interest how established?
- Express Declaraton of Trust.
- Common Intention Constructive Trust.
When the legal title is in the name of one, what is the fromality for the express declaration of trust to the non-legal owner?
A signed writing.
Unless
* fraud,
* mistake,
* undue
Can be avoided when a party can demostrate:
A Declaration may be overriden by PROPRIETARY ESTOPPEL.
- representation
- reliance to the reprsesentation
- to his detriment*
*not only financial. - taking care of an elderly over a lengthyyy period
How can an express declaration of trust be rebutted?
- Proprietary Estoppel
- Duress
- Mistake
- Undue Influence
If the Claimant is successful in claiming proprietary estoppel, will he receive what was promised in the assurance?
No. Will NOT necessarily receive what promised.
Will depend on expectation and detriment.
LEGAL TITLE IN THE NAME OF ONE PARTY
Common Intention Construcive Trist: What is required?
- Common Intention: Express or Inferred*
-direct contrubution to the purchase price
- repay mortgage
- pay house expenses so taht the other can repay mortgage
- -revovation
* Inferred: - pay for renovation”
” not merely decoration or supervise renovation.
Beneficiary: How the Court decides the quantification of the claimant’s share?
Infer the parties’ intention.
Priority to Express Agreement.
The court may vary the express agreement
Conduct of the Parties/ Course of Dealing.
X Y baught a property with an express agreement 50:50 ownership. One of
CHARITABLE & OTHER PURPOSE TRUSTS
What is a purpose trust?
A trust to accomplish a purpose, not for the benefit of a person.
CHARITABLE & OTHER PURPOSE TRUSTS
What at the 2 types of PURPOSE TRUST?
A. Charitable Trusts.
B. Non-Charitable Purspose Trusts or Private Trusts.
CHARITABLE & OTHER PURPOSE TRUSTS
DIFFERENCES
Between
CHARITABLE TRUSTS
&
EXPRESS PRIVATE TRUSTS
1. No Ascertainable Human Beneficiaries
2. May be Perpetual
3. Cy-Pres Doctrine (Redirect to a purpose “as near as possible” to the charitable purpose initially designated.
CHARITABLE & OTHER PURPOSE TRUSTS
Name the Charitable Purposes
Under the Charities Act of 2021:
1. The prevention or relief of poverty
2. The advancement of education
3. The advancement of religion
4. The advancement of health or the saving of lives
5. The advancement of citizenship or community development
6. The advancement of the arts, culture, heritage, or science
7. The advancement of amateur sport
8. The advancement of human rights, conflict resolution, or reconciliation, or the promotion of religious or racial harmony or equality and diversity
9. The advancement of environmental protection or improvement
10. The relief of those in need because of youth, age, ill-health, disability, financial hardship, or other disadvantage
11. The advancement of animal welfare
12. The promotion of the efficiency of the armed forces of the Crown, or the efficiency of the police, fire, and rescue services, or ambulance services.
13. Any other purposes currently recognized as charitable, or that may reasonably be regarded as analogous to, or within the spirit of, any purposes previously recognized as charitable.
CHARITABLE & OTHER PURPOSE TRUSTS
Requirements for a Charitable Trust
- Purpose must be Wholly & Exclusively Charitable.
- Must be for Public Benefit
- For the public or section of public.
What are the elements to the public benefit test?
- identifiable benefit
- public / section of the public
What is the public/section of the public test for the public benefit test?
Beneficial to public, or section of public,
- not a private class
- must not be negligible in number
- must not depend on relationship to a particular person
CHARITABLE & OTHER PURPOSE TRUSTS
When a charitable trust fails?
A. Groups related to an Individual or Business
B. Effect of Fees PAY ATTENTION Private School: If a significant programme whereby children can be admitted without payng fees OR makes facilities available to the public, the public benefit test is satisfied.
C. Political Pursposes are NOT Charitable
C. Purpose EXCLUSIVELY charitable
D. Each Purpose must be Charitable.
Do political objectives count as charitable?
No
(although can use political means to achieve a charitable objective).
CHARITABLE & OTHER PURPOSE TRUSTS
Private schools with fees can still operate under a charitable trust. When?
1.Advancement of Education as a Charitable Purpose
Education is traditionally recognized as one of the core charitable purposes. A private school that advances education can, in principle, be established under a charitable trust, as long as it primarily serves a charitable purpose. Charging fees does not automatically disqualify it from being considered a charity.**
2. Public Benefit Requirement
Most jurisdictions require that charitable organizations provide a “public benefit.” In the context of a private school, this means:
**Accessibility: **The school should not only cater to students from wealthy families who can afford the high fees. There needs to be some way in which the broader community benefits from the school’s existence, beyond just the fee-paying students.
Scholarships and Bursaries: One common way to satisfy the public benefit requirement is for the school to offer scholarships, bursaries, or other financial assistance to students from low-income backgrounds, allowing them access to education they could not otherwise afford.
Wider Community Benefit: Some schools demonstrate public benefit by making their facilities available for community use, offering outreach programs, or engaging in activities that benefit local schools or the general public.
CHARITABLE & OTHER PURPOSE TRUSTS
Political Purposes are not Charitable.
CHARITABLE & OTHER PURPOSE TRUSTS
Can the Court Sever the Charitable from Non Charitable Trusts?
Yes.
And Allow the Charitable Part to Take Effect.
CHARITABLE & OTHER PURPOSE TRUSTS
How can a Charitable Trust be enforced?
On behalf of the public by the Attorney General.
CHARITABLE & OTHER PURPOSE TRUSTS
When can the initial gift to a charity vest?
Within the perpetuity period.
BUT
A gift from the charity to another can take effect at distance any time
CHARITABLE & OTHER PURPOSE TRUSTS
CY-PRES Doctrine
The cy-près doctrine applies when it becomes impossible, impractical, or illegal to carry out the original charitable purpose of a trust.
The doctrine allows the court to modify the charitable purpose of a trust or gift, so that the funds can be used for a purpose as close as possible to the original intention of the donor.
The term “cy-près” means "as near as possible" in French, reflecting this idea of approximation to the donor’s original intent.
CHARITABLE & OTHER PURPOSE TRUSTS
Use an Example when the Cy-pres Docrine Applies in the Initial Failure of a Trust:
Example:
A donor leaves money in their will to a hospital that closes down before the donation is received. Since the hospital no longer exists, the funds can be redirected to a similar charitable institution, such as another hospital or a medical charity.
CHARITABLE & OTHER PURPOSE TRUSTS
Use an Example when the Cy-pres Doctrine Applies when a Subsequent Trust Fails:
Subsequent Failure (Failure After the Trust Is Set Up)
Cy-près also applies when a charitable purpose that was originally valid becomes impossible, impractical, or illegal to fulfill after the trust has been established. This is known as subsequent failure and occurs in situations such as:
The charity or institution ceases to exist.
The charitable purpose has already been fulfilled, or there is surplus property remaining.
The purpose becomes outdated, obsolete, or impractical due to changes in society, law, or circumstances.
The trust or charity can no longer effectively use the funds for the original purpose.
In these cases, the funds are redirected to a charitable purpose that is as close as possible to the original.
Example:
A trust is established to provide scholarships for students in a particular profession, but that profession no longer exists or is no longer in demand. The courts may apply cy-près to direct the funds towards scholarships for a related profession or field of study.
CHARITABLE & OTHER PURPOSE TRUSTS
What is Required to Apply the Cy-pres Doctrine?
General Charitable Intent
For cy-près to be applied, the court often considers whether the donor had a general charitable intent. If the donor’s intent was specific to one charitable purpose or institution, and it fails, the funds might revert to the donor’s estate.
**Only for Initial Failure of the Gift ** - General Charitable Intention is Required
**Subsequent Failure of the Gift **- No Charitable Intetion Required.
CHARITABLE & OTHER PURPOSE TRUSTS
Is it possible to apply the Cy-pres Doctrine when the testator’s will containes a Gift to a Specific Named Charity e.g a legacy to “Newtown Home for Stray Cats”?
**It is possible.
**
If the donor’s intent was specific to one charitable purpose or institution, and it fails, the funds might revert to the donor’s estate. However, if the court can infer that the donor had a broader charitable intention (for instance helping cats), then cy-près can be applied more easily.
Example of General Intent:
If a donor leaves money to a specific charity to help “alleviate poverty,” and the charity no longer exists, cy-près can redirect the funds to another poverty-related charity because the general intent was charitable, even though the specific charity no longer exists.
Example of Specific Intent:
If a donor gives money explicitly to a very niche and narrow purpose, like a small local charity with no broader charitable intention, and the charity closes, the gift might revert to the donor’s estate if there’s no general charitable intent
CHARITABLE & OTHER PURPOSE TRUSTS
In the subsequent failure of the gift is charitable Intention Required to apply the CY-PRES DOCTRINE?
No.
CHARITABLE & OTHER PURPOSE TRUSTS
Is it possible to apply the Cy-pres Doctrine when the testator’s will containes a Gift to a Specific Named Charity, where the Charity named in the will never existed?
Yes.
It is easier to infer a general Charitable Intention.
CHARITABLE & OTHER PURPOSE TRUSTS
Is General Charitable Intention required in cases where money have been collected or raised where the donors are not known?
No.
EXAMPLE:
NONCHARITABLE PURPOSE TRUSTS
What non-charitable purpose trusts are allowed?
- particular animals
- monuments and graves - not private individuals
- private masses (Denley Trust).
NONCHARITABLE PURPOSE TRUSTS
How does the inalienability rule apply to non-charitable purpose trusts?
What should non-charitable purpose trusts include to ensure they comply with rule against inalienability?
An express perpetuity clause.
Given the amount must vest within a maximim of 21 years.
TRUSTEES
Shares & Land - Replacement Trustees (Example)
TRUSTEES
TRUSTEES DUTIES & POWERS
Duty Not to Profit from the Trust.
What happens wih the Director’s Fees?
If fees by virtue of the shares as trustee, has been appointed director, holds the funds they paid on contructve trust for the trust beneficiaries.
- It it can be shown that the trustee would have been appointed as a director withput the voting rights attched to the compay shares, the rule does not apply.
TRUSTEES DUTIES & POWERS
TRUSTEES DUTIES & POWERS
TRUSTEES DUTIES & POWERS
LIABILITY FOR BREACH OF TRUST
The Beneficiaries will receive the one amount from the sale proceeds (from the charge over the asset) and for the remaining (e.g. 3,00 GBP) will rank equally with the claims of teh trustee’s other creditors.
LIABILITY FOR BREACH OF TRUST
When is Unconsionable for the Recipient to retain the Property?
