Trusts Flashcards
What are the 5 principal characteristics of a trust?
- Trust property
- A trustee
- A duty
- Objects
- An equitable proprietary interest
What are 2 qualities of a beneficiary?
-Rights correlative to trustee’s duties and can enforce those duties
-An equitable proprietary interest in the trust property
A beneficiary has equitable proprietary interest in trust property. What does this allow them to do?
-Enforce interest against everyone except equity’s darling (i.e., 3rd party buys asset with due consideration + did not know that it was on trust)
-Claim an interest in the traceable proceeds of trust property
What is the difference between a contract and a trust?
-Result of agreement between parties (which owe obligations to each other) vs no need for agreement between parties (obligations from T to B)
What is the difference between debtor-creditor relationships and trusts?
-Debt does not relate to specific assets/funds vs duty relating to specific property
-Personal right to repayment vs equitable proprietary interest
-A bank is not a trustee of money deposited by its customers
What is the difference between agency and trusts?
-Agent can commit a principle to a contract with a 3rd party vs a trustee cannot commit B to contract with a 3rd party
(Note: both are s.t. fiduciary duties)
What is the difference between bailment and trusts?
-Subject matter: tangible personal property vs anything
-Bailor is not legal owner
What is the difference between administration of estates and trusts?
-Time: as quickly as possible vs potentially many years
-Interests of rights: personal right against executor relating to proper administration of estate vs B has equitable proprietary interest
What are the 2 methods of creating an express trust?
-Self declaration of trust
-Transfer on trust
When is constitution required?
Transfer on trust: transfer legal title to trustee
What is required for all express trusts (x3)? What is additional required for inter vivos express trusts (x2) and testamentary express trusts (x1)?
All:
1. Certainties
2. Beneficiaries / permitted purpose
3. Compliance with applicable perpetuity rule
Inter vivos express trust:
-Transfer on trust: constitution
-Trust of land: manifested and provided by some writing signed by some person who can declare such trust or by his will
Testamentary express trust:
-s9 Wills Act
What is required (in general) for an enforceable trust of land? What is the exception?
- Written +
- Signed by someone who can declare trust (usually settlor; arguably trustee) or declared by will (i.e., satisfies s9)
Exception: resulting, constructive and statutory trusts?
What happens if s53(1)(b) (regarding formalities for declaring trust of land) is not complied with?
Trust is unenforceable (not void): B cannot enforce their rights (note: once enforceable, Bs can enforce their rights in respect of period between declaration and satisfaction)
How does the rule in Saunders v Vautier work for multiple beneficiaries?
- Adult Bs (with full mental capacity) who exhaust all possible claims on a trust fund can collectively terminate the trust
- Where Bs exhaust all possible claims on part of a trust fund, they can terminate the trust in relation to that part (e.g., fixed trust in equal shares)
(Note: look for gift-over)
Can beneficiaries with contingent interests exercise S v V rights?
Yes, if they act together with all other persons who share the beneficial interest in the property, incl. objects of any gift-over
What are the 3 certainties?
- Intention
- Subject matter
- Objects
What is the requisite intention for certainty of intention?
Intention to assume duty to hold or apply property for beneficiaries
Certainty of intention: how can intention be ascertained? What are some relevant factors?
- Words: imperative; word ‘trust’ is not determinative
- Conduct: segregate funds in a separate bank account which has been earmarked for particular person/purpose; treat sole bank account as joint
What approach is taken to ascertain intention?
Objective approach: if they manifest an intention to impose/ assume the duty which is characteristic of a trust, they intend to create a trust (irrelevant that they do not actually (i.e., subjectively) intend to create a trust or are unaware that they even exist)
What are the 2 requirements for certainty of subject matter?
- Trust property requirement
- Beneficial entitlement requirement
What are the 2 main problems with the trust property requirement?
- Identifying subject matter by description: cannot create trust of ‘bulk’ or ‘net assets’
- Identifying subject matter out of a larger mass
Are fractional interests acceptable for the trust property requirement?
Yes, if wider mass of assets has been clearly identified
Which is the only combination of tangible & fungible that will produce valid trust property?
Intangible & fungible (e.g., trust over same type of shares)
What are examples of void trusts where subject matter is identified as a specific number of a larger mass?
Tangible & fungible: 20 out of 100 bottles of wine; 1 out of 5 1kg bars of gold
Tangible & non-fungible: trust over diamonds