Trusts Law Flashcards
What are express trusts?
An express trust is created to either benefit individuals or achieve a purpose.
What are implied trusts?
Arise through there has been no express intention to create a trust. They come into existence as a matter of law.
Two types of implied trust:
1) Resulting trust
2) Constructive trust
What is a resulting trust?
Type of implied trust.
Implied in situatrions where it is presumed the settlor intended a trust
What is a constructive trust?
A type of implied trust.
Imposed where the court feels it would be unconscionable to deny another person an interest in the property.
What are the two ways a trust may come into effect?
Inter-vivos - during the settlors lifetime
Testementary trust - on death as set out in their will
What are the three certainties of intention?
1) Certainty of intention
2) Certainty of Subject Matter
3) Certainty of objects
What is meant by Certainty of Intention?
It must be clear that the person making the declaration intended to create a trust (although the use of the word ‘trust’ is not essential). Failure to do so will mean the recipient of the property will take the property as a gift.
What are precatory words?
Express as a hope, wish, or moral obligation and usually indicates a gift was intended (not a trust).
What are imperative words?
Express a command and indicate a trust or power is intended. The words impose a duty on someone to act as a trustee and hold property for someone else.
What is meant by Certainty of Subject Matter?
It must be clear 1) what property is being held on trust; and 2) what the individual interest of the beneficiaries are.
What are important points to remember regarding the description of property within the context of certainty of subject matter?
Vague or general descriptions of a trust property will render the trust void such as ‘the bulk of the estate’.
With tangible property, the physical separation of the trust property is required, (e.g. boxes of wine should be separated from other boxes), with intangible property, no separation is required (e.g. shares in a company).
What are important points to remember regarding the Beneficiary’s Interest within the context of Certainty of Subject Matter?
The beneficial interests must be clear, meaning that the beneficiary’s share under the trust must be allocated in some way when the trust is established. If there is a method of allocation of a beneficiary’s share, and this becomes unworkable, the trust will fail even though the trust property is identifiable. Note that the trust must be over existing property. Future property does not constitute property.
What is meant by Certainty of Objects?
It must be clear who the beneficiaries of the trust are. The test is different for fixed and discretionary trust.
What is the test that must be met to satisfy Certainty of Objects in a fixed trust?
The beneficiaries are specified in the trust instrument or it must be possible to draw up a complete list of every beneficiary (the ‘complete list test’)
What is the test that must be met to satisfy Certainty of Objects in a discretionary trust?
The trustee is given discretion to select who amongst a class of beneficiaries will benefit. Here the ‘individual ascertainability test’ applies which states that you need 1) conceptual certainty 2) evidential certainty, and 3) administrative workability.
What is meant by conceptual certainty?
Where the class of beneficiary is not susceptible to legal definition, it fails i.e. ‘my friends’
What is meant by evidential certainty?
Where obtaining obtaining evidence or whereabouts of beneficiaries is impractical
What is meant by administrative workability?
Where the definition of beneficiaries is so wide it is administratively unworkable, it fails.
What is the Beneficiary Principle and Perpetuities?
To be a valid trust, these further requirements must also be met:
1) Beneficiary principle - a trust must be for the benefit of individuals
2) Rule against perpetuities - the beneficial interest under the trust must vest (i.e. become uncomditional) within 125 years.
What are the formalities required to create testementary trusts? and what happens if it fails?
1) Declaration of trust
2) Transfer of title
If a testementary trust fails the equitable interest will revert to the residuary beneficiary under the terms of the Will.
What is required to create an inter vivos trusts? and what happens if it fails?
1) Declaration of trust
2) Transfer of title
If an inter vivos trust fails, the equitable interest will result back to the settlor if they are still alive.
What are the formalities for an inter vivos trust when dealing with property other than land?
Governed by s.53, LPA 1925 - other than three certainties, no additional formalities are required.
What are the formalities for an inter vivos trust when dealing with land/ an interest in land?
Governed by s.53, LPA 1925
Must comply with s.53(1)(b)- requires evidence of the trust in writing signed by the settlor. Failure to comply makes the trust unenforceable by beneficiary (not void).
What are the formalities for an inter vivos trust when dealing with an Existing Trust Interest (e.g. beneficiary transferring interest under a trust, or directing a trustee to transfer a beneficiary’s interest)?
Must comply with s.53(1)(c) - disposition must be in writing and signed by the person disposing of the interest. Applies to all personal property and land. Failure to comply makes the transfer void (not unenforcable). Disposition itself must be made in writing not merely supported by documentary evidence.
