Trusts of land Flashcards
Types of trusts?
Express and Implied trusts
Express trusts?
An express trust is made knowingly and intentionally. Must be made in writing however there are exceptions to this rule where it may not need to be made in writing, such as secret trusts.
Implied trusts?
Implied trusts arise without the express declaration of trust by the settlor. Implied trusts fall outside the requirement for formalities required by s.53 LPA 1925. They are implied by law.
2 types of implied trusts?
Resulting and constructive trusts
What is a resulting trust?
Resulting trusts can be automatic or presumed.
Presumed:
Where A transfers, or directs a trustee for him to transfer, the legal estate in property to B otherwise than for valuable consideration it is a question of the intention of A in making the transfer whether B is to take beneficially or on trust and, if the latter, on what trusts. If, as a matter of construction of the document transferring the legal estate, it is possible to discern A’s intentions, that is the end of the matter…If, however, the document is silent, then there is said to arise a resulting trust in favour of A; but this is only a presumption and is easily rebutted…”
Automatic:
If A intends to give away all his beneficial interest in a piece of property and thinks that he has done so, but, by some mistake or accident or failure to comply with the requirements of the law, has failed to do so, either wholly or partially, there will, by operation of law, be a
resulting trust for him of the beneficial interest which he has failed effectively to dispose of.”
Resulting trusts operate independently of the intention of the party, but this is not an absolute. The ‘settlor’ may
not intend to create a trust but they may still intend to benefit another person with the property. The courts look at the intention to benefit another person rather than the intention to create a trust (Twinsectra v. Yardley [2002]).
Powers of Trustees
- Management
- Postponement
- Delegation
Management
Section 6 TOLATA provides that trustees of a trust of land shall have all the powers of an absolute owner of the land.
This includes the power to purchase a legal estate in land, whether for investment (i.e. let out to tenants to produce an income for the beneficiaries), occupation by a beneficiary or any other reason (s6(3)). They may also sell the land in the trust and buy other land (s17(1)). S6 powers may be restricted or made exercisable only with the consent of any person by virtue of s8(2). Apart from this, the only restriction on trustees is a duty to comply with any other rule or enactment when investment and to have an impartial regard to the rights of all of the beneficiaries (s6(5)).11
Section 6(2) gives trustees the power to convey land to the beneficiaries, if they are absolutely entitled and of full age and capacity - whether or not they have requested this. There is no duty to consult the beneficiaries, and the beneficiaries must take any steps necessary to complete the transaction. A court order may be obtained if they do not.
Postponement
Section 4 TOLATA provides that in an express trust for sale, a power to postpone shall be implied irrespective of the grantor’s intention.
This means that if the trust imposes a duty on the trustees to sell, sale is not obligatory in practice so long as the trustees are unanimous. However, if one trustee wishes to sell, a sale should take place because one trustee can enforce a duty (sale) whereas the trustees must be
unanimous to exercise a power.
Delegation
Section 9 TOLATA gives the power to delegate the functions of the trustees to the beneficiary or beneficiaries of full age who are entitled to possession, but the trustees will be fully liable for the actions of the delegate. This only relates to their powers concerning the land, not any other assets in the trust. The delegation must be by power of attorney, and must be by all of the trustees - though it may be revoked any them.
Duties of trustees
- Consents
- Consultation
Consents
Section 10 deals with the protection of purchasers, where the trust requires the trustees to obtain consent of any person before exercising any of their powers and duties (e.g. where the grantor wants the property to be retained for occupation of a beneficiary).
Where two or more consents are required, the purchaser will be protected if two consents are obtained. This means that the transaction will be valid, but the trustees will remain liable to the beneficiaries for breach of trust if they fail to obtain all the required consents. If consent cannot be obtained (e.g. because the beneficiary is an infant without a parent/guardian or lacks mental capacity), application must be made to the court under s14 if the trustee is to be protected from liability
Consultation
Section 11 imposes on trustees a duty to consult the beneficiaries of full age and capacity at present entitled to possession before exercising their powers or duties - so far as it practicable. The trustee must give effect to their wishes or the wishes of the majority in value - and
they would need sound reason for ignoring their wishes if they were to avoid legal liability.
However, the consultation provisions can be excluded and there is no duty to consult beneficiaries when exercising a s6(2) power (convey land to beneficiaries).
What is a trust?
A relationship whereby property is held by one party (the trustee) for the benefit of another (the beneficiary).
b) The trustee has legal title to the trust property, the beneficiaries have equitable title.
c) The terms of an express trust must be written down where the trust property includes land.
Why were trusts originally created?
An equitable remedy to provide for returning crusaders who could not get their lands back through the common law.
Why create a trust today?
Arrangements for minors, co-ownership, finance and taxation, succession planning.
