Untitled Deck Flashcards
What is a trust?
a legal arrangement where one person (the trustee) holds and manages property or assets for the benefit of another person (the beneficiary).
Which persons are required for a trust?
- Settlor: creates the trust
- trustee: administers the assets
- Beneficiary: is entitled to benefit from trust
Why are trusts created?
- Managing assets for minors (children too young to handle their inheritance)
- Protecting family wealth by ensuring it’s used wisely and for specific purposes (like education)
- Estate planning to manage taxes and pass on wealth efficiently
What is a private trust?
It is a trust that is not charitable
Who is a settlor in the scope of trust law?
It is the person creating the trust
What does inter vivos mean in the scope of trust law?
during the liftime of the settlor
in what ways can a settlor create a trust?
in many ways:
* through a trust instrument (in writing)
* through a will (in writing)
* by words
* by conduct
How does a court determine whether a trust has been created?
Through construction of the written document, the words or conduct
What is a testamentary?
It is a trust created in a will
Who is the testator?
the person who created the will
Who is a trustee?
He holds the legal title of the trust assets and is under a duty to administer the assets for the benefit of the beneficiaries
Who is the beneficiary in the scope of trust law?
The person entitled to benefit from the trust; holds the equitable title to the trust assets and has beneficial interests
To create a valid trust, the settlor must ensure that all … certainties are present
three
What are the three certainties?
- Certainty of Intention
- Certainty of Subject Matter
- Certainty of Objects
What is the certainty of intention (trust law)?
There must be a clear intention by the person creating the trust (the settlor) to establish a trust.
The settlor’s words or actions should show they want the trustee to manage the assets for the benefit of the beneficiary. Phrases like “I wish” or “I hope” might not be strong enough to show a clear intention
What is the certainty of subject matter?
The trust property (or subject matter) must be clearly defined.
It should be clear what specific assets or property are included in the trust, so the trustee knows exactly what they’re responsible for. If it’s too vague, the trust might fail
What is the certainty of objects?
The beneficiaries (or objects of the trust) must be clearly identifiable.
The trust must specify who will benefit from it, or at least provide a clear group or class of people from whom the beneficiaries can be identified
“What does equity looks to the substance rather than the form” mean?
In cases involving fairness (equity), courts prioritize the true intention and purpose behind an action or transaction rather than just its formal structure or wording
What are precatory words?
Words expressing confidence, wish, belief, desire, etc.
Is the use of precatory words likely to result in the creation of a trust?
No.
There is lack of certainty of intention
What does “gift in default of appointment” mean?
In trust law, it refers to a provision made for a situation where someone with a power of appointment fails to exercise that power.
The “gift in default” then specifies who should receive the property or assets if the person with the power of appointment does not make a decision or appointment.
Does the usage of the term “trust” create a trust?
It depends on the context.
The court must determine the settlor’s true intention.
How can a trust be created through words?
The intention to create a trust must be clear
What is the residuary estate?
Everything that is left in a deceased’s estate after:
* all debts have been paid
* all taxes have been paid
* all** specific and non-specific gifts** have been distributed
What does “class of beneficiaries” mean in the context of trust law?
There is more than one beneficiary in a trust, but the settlor has not identtified each and every beneficiary (e.g. “my grandchildren”)
What is a fixed trust?
Each beneficiary is entitled to a specific share of the trust property
What is a discretionary trust?
The trustees have a discretion on whether or not to pay any member of a defined class of beneficiaries.
–> the beneficiaries have no automatic right to payment
What is the individual ascertainability test? (trust law)
It is a legal test to determine whether the** beneficiaries** of trust can be identified with certainty
Where is the individual ascertainability test used (trust law)?
In discretionary trusts.
Can it be said with certainty that any given individual is or is not a member of the class?
What is conceptual uncertainty?
The words used by the settlor to describe the beneficiaries are too vague for the courts to apply
What is evidential uncertainty?
It is impossible to determine exactly who fits the definition of beneficiary due to lack of evidence
What is administrative unworkability?
The description used by the settlor is clear, but the definition of beneficiaries is too wide to form a class
What are the three certainties required for a valid trust?
The three certainties are certainty of intention, certainty of subject matter, and certainty of objects.
What is ‘certainty of intention’ in trust law?
It means the settlor must clearly intend to create a trust, shown through words or actions that demonstrate the intent.
What are ‘precatory words,’ and how do they affect trust creation?
Precatory words express a wish or hope but are usually insufficient to create a trust, as they lack the clear intent required.
How can ‘certainty of subject matter’ be achieved in a trust?
The property subject to the trust must be clearly defined, so there is no ambiguity about what is included in the trust.
What is the difference between tangible and intangible assets in the context of trust subject matter?
Tangible assets require segregation to be certain, while intangible assets like shares can be part of a trust without segregation.
What is ‘certainty of objects’ in trust law?
Certainty of objects means the beneficiaries of the trust must be identifiable, ensuring they are ascertainable to enforce the trust.
What is the ‘class ascertainability test’ for a fixed trust?
The class ascertainability test requires that all beneficiaries can be listed for the trust to be valid.
What is the ‘individual ascertainability test’ for a discretionary trust?
This test checks if it can be determined whether any given individual is or is not a member of the class of beneficiaries.
What happens if a trust lacks certainty of intention, subject matter, or objects?
If any of the three certainties are missing, the trust fails, and the property is usually returned to the settlor or their estate.
What is ‘conceptual certainty’ in trust law, and why is it important?
Conceptual certainty ensures that terms used to describe beneficiaries are clear and unambiguous, allowing the trust to be enforceable.
What is ‘evidential certainty’ in the context of a trust?
Evidential certainty means there is enough evidence to determine who fits the beneficiary description, even if the term is conceptually clear.
What is ‘administrative unworkability’ in trust law?
Administrative unworkability means a trust fails if the class of beneficiaries is too large or vague to be practically managed.
What is a ‘gift in default of appointment’?
It is a fallback provision ensuring the property goes to specific beneficiaries if the person with a power of appointment doesn’t make a choice.
How does the court treat informal words and actions regarding trust intention?
Informal words or actions can show intent to create a trust, as long as the intention is clear and doesn’t rely solely on formal language.
What role does ‘extrinsic evidence’ play in resolving evidential uncertainty?
Extrinsic evidence, like records or documents, can clarify who the beneficiaries are if there is evidential uncertainty in the trust terms.
