💸Trusts: creation, beneficial interests, ending Flashcards
Types of trust
EXPRESS: settlor intends to create
i. Fixed interest trusts: settlor stipulates how prop distributed
ii. Discretionary trusts: Ts have discretion as to amounts/whether Bs receive anything (objects not Bs)
IMPLIED: arises due to circumstances
i. Resulting trusts: presumed settlor would have intended a trust if they’d thought about it
ii. Constructive trusts: Implied to achieve fair result between parties involved
Ways for trusts to be created
a. Inter vivos trust (during settlors lifetime)
b. Testamentary trust (declaration of trust by testator/testatrix in will)
c. The residuary estate
Elements to create an express trust
1.Valid declaration of trust
2. Constitution
Elements of a valid declaration of trust
- Certainty of intention (to create a trust)
- Certainty of subject matter
- Certainty of objects
- Compliance with the beneficiary principle
- Satisfy the rule against perpetuities
Declaration: Certainty of subject matter: requirements
i. Clear, specific description of trust property (Groups of objects must be described unless identical and intangible (ie. Shares NOT wine))
ii. Certainty/description of beneficial interest in that property (unless trust made for group then shares assumed equal)
Declaration: 2 tests for certainty of objectsfor different types of trust
i. For fixed interest trusts: complete list test
ii. For discretionary trusts: any given postulant test
Declaration: Certainty of objects: elements of complete list test
Must be possible to draw up complete list of every beneficiary
If Bs are class of people, need:
1. Conceptual certainty-description of class clear and objective
2. Evidential certainty-have evidence to identify all Bs that will benefit
Declaration: Certainty of objects: elements of any given postulant test
Administrative unworkability-will be if so hopelessly wide as not to form anything like a class (depends on size of trust)
Capriciousness-will be if no rational reason for trust/no rational basis on which trustees can exercise discretion to distribute trust prop
Declaration: what is the beneficiary principle
Trust must be for the benefit of individuals/generally need ascertainable human beneficiaries
Declaration: what is the rule against perpetuities
Law only tolerates trusts that last for an acceptable period.
Trust created on/after 1 April 2010 permit a 125- year perpetuity period=contingent interest trusts need to fall within 125y or void
Declaration: formalities for wills trusts
must comply with the Wills Act 1837 (contained in a will made in writing, signed in joint presence of 2 witnesses who must also sign)
Declaration: formalities for personalty and land
PERSONALTY: No written formalities, declaration may be oral
LAND
1. in writing (Need not be deed)
2. Written evidence must contain terms of trust
3. Signed by settlor
Can be email if ‘deliberately subscribed’ name at end
Constitution: what to do if settlor appoints themselves trustee
Just have to comply with valid declaration as settlor already has legal title
Constitution: what to do for land
- Settlor execute deed in favour of trustees
- Send deed to LR or hand to donee
- LR registers the transferee as new legal owner (this is when title passes)
Constitution: what to do for shares
Shares within CREST (Usually larger companies /publicly trading companies): use computerised share transfer system-registration and disposal immediate
Non CREST shares (usually ltd co)
1. Complete & sign stock transfer form
2. Send form and existing share certif to co
3. New shareholder registered in Register of Members by company (legal title passes upon registration) and sent a shareholder certificate
Constitution: what to do for money
Cash-Legal title transfers on delivery
Check -Legal title passes when check clears, if settlor dies before, cheque cant be cashed
Electronic transfers -Legal title passes when money arrives in trustees bank account
Constitution: what to do for chattles
physical delivery OR deed
General rule for incorrect constitution of trust
Generally, ‘equity will not assist a volunteer (no consideration for transfer of prop)
AND ‘equity will not perfect an imperfect gift’
Exceptions to incorrect constitution of trust
- EVERY EFFORT TEST: passed point of no return and all that remains is act of third party.
- STRONG V BIRD:
*Intended to make immediate unconditional lifetime transfer
*Intention continued to death
*Intended trustee acquired title by becoming PR - UNCONSCIONABILITY: Settlor declares themselves one of may trustees but fails to transfer title to others, unconscionable to not make others trustees
Types of beneficial entitlement
VESTED: no conditions to satisfy
CONTINGENT: Interest conditional on future event that may not happen OR B doesn’t yet exist.
INTEREST IN POSSESSION: B can enjoy immediately
INTEREST IN REMAINDER: if have to wait until another B right of use expires
LIMITED: to income (received on regular basis)
ABSOLUTE: interest in income AND capital (capital return=underlying value of property)
What is a bare trust
A trust for a sole, adult, mentally capable beneficiary gives them a vested interest
Beneficiary can bring trust to an end at anytime by requiring trustees to convey whole trust fund to beneficiary
When is a beneficiary absolutely entitled
if interest is VESTED and IN POSSESSION and ABSOLUTE.
What is the rule in Saunders v Vautier
Bs can end trust under by calling for a transfer of trust property to themselves/other trustees if all Bs who could possibly become entailed:
1. Are in existence and ascertained
2. Are sui juris (over 18, mentally competent)
3. Agree to bring trust to an end
4. Are absolutely entitled to the whole fund between them
