2) Creation

Question 1

The Beneficiary Principle

Answer 1

• A trust must have a beneficiary, this is because the beneficiary is the person who is able to hold the trustee to account
• If there is no enforceable obligation, the trustee can do what they want = not compatible with notion of a trust.

Question 2

Exceptions to the beneficiary principle

Answer 2

• Charitable and non-charitable purpose trusts.

Question 3

Certainty of objects

Answer 3

• Objects of a trust = beneficiaries
• Needs to be certainty as to objects.
• Court cannot enforce obligations if they are not clear.

Question 4

Fixed Trust

Answer 4

• A trust in which the entitlement of the beneficiaries is fixed by the settlor
  A fixed interest trust

Question 5

Discretionary Trust

Answer 5

• A trust under which the trustees have a discretion to distribute betweeen objects of the trust.

Question 7

Fixed trust overview

Answer 7

• Equitable proprietary rights.
• These rights are assets which are capable of sale or other forms of transfer and can be asserted aginst third parties.
• eg if trustee gives away trust property, beneficiary can assert their equitable rights agaisnt the new legal owner.
• Rights may be vested (have a current right), or contingent (right is conditional)

Question 8

Discretionary trust

Answer 8

• Objects of a discretionary trust do not have proprietary rights
• Until discretion is exercised, discretion may be exercised in favour of any object.
• Cannot assert their rights against third parties
• Although they do have sufficient interest in trust proeprty to compel its return to the trust fund.

Question 9

Express Trust

Answer 9

• An express trust has been intentionally created.
• Legal title will be held by a trustee.
• Beneficial / equitable title will be held by a beneficiary.

Question 10

How can a settlor create a trust?

Answer 10

1) Declaring themselves as a trustee
2) Transferring property to a third-party trustee.

Question 11

Settlor

Answer 11

The person who creates the trust is called the “settlor” of the trust.

Question 12

Full Legal Owner

Answer 12

A “full legal owner” of property owns it both legally and beneficially.

Question 13

What is a sub-trust

Answer 13

• A trust over an equitable interest
• Including a beneficial interes undr a trust

Question 14

Self-declaration of trust

Answer 14

• Requires the settlor to manifest an intention to hold one of their assets on trust for the beneficiary.
• Once a trust has been created the settlor remains the legal owner of the asset.
• They divested their beneficial interest
• Settlor becomes the trustee

Question 15

Transfer on Trust

Answer 15

• Requires the settlor to transfer property to a third party.
• To manifest an intention that the third party should hold the property on trust for the beneficiary.
• The trustee becomes the legal owner of the proeprty.
• A new equitable interest is creatd for the beneficiary.

Question 16

What happens to legal title when there is self-declaration of trust?

Answer 16

Legal title is retained by settlor, now in the capacity of trustee/

Question 17

What happens to equitable title when there is self-declaration of trust?

Answer 17

New equitable interest is created for the beneficiary

Question 18

What happens to beneficial ownership when there is self-declaration of trust?

Answer 18

Transfer from settlor to beneficiary.

Question 19

What happens to legal title when there is transfer on trust?

Answer 19

Transferred to trustee (requires constitution)

Question 20

What happens to equitable title when there is transfer on trust?

Answer 20

New equitable interest created for beneficiary

Question 21

What happens to beneficial ownership when there is transfer on trust?

Answer 21

Transfers from settlor to beneficiary.

Question 22

Self-declaration of trusts

Answer 22

• Transfer of beneficial ownership while legal ownrship remains with settlor.
• Retain legal title but hold it in new capacity as a trustee..
• A new equitable interest is created for the beneficiary.

Question 23

Trnasfer on trust

Answer 23

• Settlor transfers legal title to a trustee who holds it for a beneficiary.
• More complicatd than a self-declaration as involves change in both legal and equitable title
• Settlor starts as full legal owner. Then transfer to a third party, to hold a a trustee.

Question 24

Transfer on trust for third party

Answer 24

• Settlor will part with both legal and beneficial title to trust property.
• Trustee holds all the trust property on trust for the beneficiary and the settlor now has no interest in the property at all.

Question 25

Transfer on trust for settlor

Answer 25

* Possible for a settlor to transfer property to a trustee to hold on trust for the settlor themselves. * Will be a transfer on trust. * Transfer of legal title to a third party trustee but trustee would be holding property on trust for the settlor. * Settlor has beneficial and equitable ownership * = Creation of new equitable ownership

Question 26

Three Certainties

Answer 26

* **Certainty of intention** - must show that a trust arrangement is intended, as opposed to some other arrangement (gift or loan) * **Certainty of subject matter** - must be possible to identify 1) trust property 2) beneficiaries interest * **Certainty of objects** - Must be possible to identify or ascertain beneficiaries of the trust

Question 27

Perpetuity rules

Answer 27

Trust is not intedned to be a permanent way of holding property. Trusts are subject to to rules known as "perpetuity rules" These limit the duration of the trust

Question 28

Transfer on trust

Answer 28

* Change of both legal and equitable title. * Rules relating to transfer of legal title = constitution * Formalities for transfer of equitable title * Different rules for different types of property * **Necessary to validly transfer legal title to the trustee to bring trust into effect. **

Question 29

Self-declaration of trust

Answer 29

* Change only in equitabale title. * Legal title does not change * Only necessary to consider whether there are any specific formalities required for the declaration of trust. * **Creation of the beneficiary's interest**

Question 30

Formalities

Answer 30

Relevant formalities to be satisfied to bring the thrust into existence Will dpend on whther trust was created during the life time or by a will

Question 31

Trust created during the lifetime

Answer 31

Inter vivos trust

Question 32

Trust created by will

Answer 32

Testamentary Trusts

Question 33

Beneificary Principle

Answer 33

* Identifiable beneficiaries required * Otherwise cannot be enforced * Trust which is created for purposes is not permissible but there are limited exceptions