Trusts - Additional Requirements for the Creation of Express Private Trusts

Question 1

Trustees

Answer 1

• Must be at least one
• If there is not at least one at the creation of an inter vivos trust it will fail for lack of delivery
• For testamentary trusts if there is not at least one trustee the court will appoint one and the trust will be effective
• If sole trustee dies the court can appoint a replacement trustee
• Anyone who has capacity to hold property for their own benefit (minors cannot be a trustee) and can be an individual or corporation

Question 2

Trust of Land

Answer 2

• Must be at least 2 trustees (or a trust corporation) and no more than 4

Question 3

Rules Against Perpetuity

Answer 3

• Prevent settlor creating trusts that will continue for a very long period of time
• Remoteness of vesting rule: applies to contingent interests (conditional upon a future event). For trusts taking effect after 6 April 2010 the interest must vest within 125 years or trust will fail
• Inalienability Rule: applies to express trusts for non-charitable purpose trusts. Trust will only be valid if limited to 21 years or rest of a living person’s life plus 21 years

Question 4

Creation of Inter Vivos Trusts

Answer 4

Created during someone’s lifetime

Settlor can declare themselves trustee:

• By clearly demonstrating by words/conduct that they intend to be legally bound as trustee
• Declarations of trusts of land must be in writing and signed by the settlor
• Declaration alone sufficient to create trust as settlor already holds trust property
• Three certainties, beneficiary principle and perpetuity rules must be satisfied

Trust with another trustee:

• Trust property not already held by trustee(s)
• Settlor must transfer property to trustee(s) in appropriate legal fashion
• Settlor must make a valid declaration of trust
• Three certainties, beneficiary principle and perpetuity rules must be satisfied
• Declarations of trusts of land must be in writing and signed by settlor

Formalities of declaration of trust:

• Need not be in writing save for declarations of trusts of land

Constituting the trust:

• Process of transferring legal title to property to trustees
• Land: legal owner must execute transfer deed which must then be registered at HMLR
• Shares: donor must sign stock transfer form which must then be registered with the company by either donor / donee
• Chattels: owner must have the intention to transfer the chattels and must deliver them to the recipient (may also be made by deed)
• Bank account: signed written notice to the bank

Question 5

Equity will not Assist a Volunteer

Answer 5

• Volunteer = intended recipient of a gift
• If something has gone wrong with constitution of the trust, equity will not step in and trust will fail
• Rationale: volunteer is receiving a gift and has not paid for the assets in question

Exceptions:

• Every effort test: if settlor has done everything required to transfer property and put property outside their control the imperfect trust will be valid
• Donatio Mortis Causa (Gift by Reason of Death): applies where donor delivers property to donee whilst in contemplation of imminent death with the intention that property be kept by donee if donor dies and returned if not and donor does die (not necessary to physically deliver the chattel)
• Rule in Strong v Bird: applies when settlor dies before trust constituted and intended trustee is settlor’s PR. Trust treated as validly constituted. This rule will not apply if it appears the settlor changed their mind about the gift before their death.
• Proprietary Estoppel: where settlor gave assurance to beneficiary which they relied on to their detriment. Gift would be valid.