Trusts: Creation and Requirements of Express Trusts

Question 1

What is a trust?

Answer 1

An equitable obligation relating to property, where a trustee holds property for the benefit of a beneficiary.

Question 2

What are the two core components of a trust?

Answer 2

The property component and the obligation component.

Question 3

Who holds the legal and equitable interest in a trust?

Answer 3

The trustee holds legal interest; the beneficiary holds equitable interest.

Question 4

Can a trustee also be a beneficiary?

Answer 4

Yes, but they must still act in the interests of the other beneficiaries.

Question 5

What types of property can be held on trust?

Answer 5

Chattels, choses in action, land, and other rights or obligations under contracts.

Question 6

What happens if trust property is destroyed through no fault of the trustee?

Answer 6

The trust ceases to exist.

Question 7

What is the consequence if a trustee is at fault in losing trust property?

Answer 7

They may be personally liable to restore the trust property or pay compensation.

Question 8

What is the obligation of a trustee?

Answer 8

To manage the legal title for the benefit of the beneficiary.

Question 9

What is the beneficiary principle?

Answer 9

Trusts must have identifiable beneficiaries or valid purposes to be enforceable.

Question 10

What is the effect of trust property in insolvency?

Answer 10

Trust property is protected and not available to the trustee’s creditors.

Question 11

How does a trust differ from a contract?

Answer 11

A trust is created by intention and imposes obligations only on the trustee, not between parties.

Question 12

How does a trust differ from a debt?

Answer 12

A debt is a personal obligation to pay; a trust is a proprietary obligation over specific property.

Question 13

What is a Quistclose trust?

Answer 13

A loan held on trust for a specific purpose; if the purpose fails, the money is returned to the lender.

Question 14

Which case established Quistclose trusts?

Answer 14

Barclays Bank v Quistclose Investments.

Question 15

What is the ruling in Twinsectra v Yardley?

Answer 15

For a Quistclose trust, there must be mutual intention that the funds be used only for a specific purpose.

Question 16

How does a trust differ from a charge?

Answer 16

A trust gives equitable ownership to beneficiaries; a charge secures a debt with a right of redemption.

Question 17

How does a trust differ from agency?

Answer 17

An agent can bind a principal; a trustee manages property without creating external legal relations.

Question 18

Who is the settlor?

Answer 18

The person who creates a trust and transfers property to a trustee.

Question 19

What is a self-declaration of trust?

Answer 19

When a settlor declares they hold their own property on trust.

Question 20

What is a transfer on trust?

Answer 20

When a settlor transfers legal title to a trustee to hold for a beneficiary.

Question 21

What is the difference between legal and equitable title in a trust?

Answer 21

Legal title is held by the trustee; equitable title belongs to the beneficiary.

Question 22

What are the three certainties for a valid express trust?

Answer 22

Certainty of intention, subject matter, and objects.

Question 23

What is the beneficiary principle?

Answer 23

A trust must have identifiable human beneficiaries or fall within allowed purpose categories.

Question 24

What is certainty of intention?

Answer 24

The intention to impose a binding obligation to hold property for another.

Question 25

What case established that 'desire' is insufficient for a trust?

Answer 25

Re Oldfield [1904].

Question 26

Does the word 'trust' need to be used to create a trust?

Answer 26

No, what matters is whether the intention is to impose trust duties.

Question 27

What case showed repeated statements could create a trust?

Answer 27

Paul v Constance.

Question 28

What role does segregation of funds play in intention?

Answer 28

It can suggest a trust was intended, but it is not conclusive.

Question 29

What is the significance of Re Kayford Ltd?

Answer 29

Segregation and intention can evidence the creation of a trust for customers.

Question 30

What is the ruling in Re Lehman Brothers?

Answer 30

Clients' money held in segregated accounts was subject to a trust.

Question 31

What are the two elements of certainty of subject matter?

Answer 31

Identifying the trust property and the beneficiaries’ share.

Question 32

Why is certainty of property important?

Answer 32

Trust duties and equitable rights are meaningless without identifiable property.

Question 33

What case ruled that a trust of the ‘bulk’ of estate is uncertain?

Answer 33

Palmer v Simmonds.

Question 34

Can you create a trust over part of a bulk without identifying items?

Answer 34

Yes for fungible, intangible assets (e.g., shares); no for tangible, non-fungible assets.

Question 35

What was held in Re London Wine Company?

Answer 35

Trust failed because specific bottles of wine were not identified.

Question 36

What is the problem with tangible fungible assets?

Answer 36

They appear identical but may not be interchangeable without identification.

Question 37

What is the beneficial entitlement requirement?

Answer 37

It must be possible to ascertain what part of the trust property each beneficiary is entitled to.

Question 38

What happened in Boyce v Boyce?

Answer 38

Trust failed due to uncertainty when choice of property for one beneficiary became impossible.

Question 39

What case accepted ‘reasonable income’ as sufficiently certain?

Answer 39

Re Golay’s Will Trusts.

Question 40

What is certainty of objects?

Answer 40

Being able to identify or ascertain who the beneficiaries are.

Question 41

What is the complete list test?

Answer 41

A requirement for fixed trusts: all beneficiaries must be identifiable.

Question 42

What is the 'is or is not' test?

Answer 42

A test for discretionary trusts: one must be able to say whether any individual is or isn’t a beneficiary.

Question 43

Which case applied the complete list test?

Answer 43

IRC v Broadway Cottages Trust.

Question 44

Which case reformed the test for discretionary trusts?

Answer 44

McPhail v Doulton.

Question 45

What is evidential certainty?

Answer 45

Whether the trustees have evidence to identify the members of the class.

Question 46

What is conceptual certainty?

Answer 46

Whether the description of the class is precise and intelligible.

Question 47

Which term failed conceptual certainty?

Answer 47

'Friends' – considered too vague.

Question 48

Which term passed despite being debatable?

Answer 48

'Relatives' – upheld in Re Baden (No.2).

Question 49

What is administrative unworkability?

Answer 49

When the class is so wide the trust cannot be practically administered (e.g., all residents of Greater London).

Question 50

Can a trust arise even without the word ‘trust’ being used?

Answer 50

Yes, if intention is clear from conduct or language.

Question 51

Does a settlor need to understand the law of trusts?

Answer 51

No; the test is objective, not based on the settlor's legal knowledge.

Question 52

What did Mussoorie Bank v Raynor show?

Answer 52

Vague intentions and lack of certainty suggest no trust was intended.

Question 53

Is it necessary to identify all beneficiaries in a discretionary trust?

Answer 53

No, only to apply the ‘is/is not’ test.

Question 54

What happens if the discretionary class is too wide?

Answer 54

The trust may be void for administrative unworkability.

Question 55

Can a purpose trust be valid?

Answer 55

Yes, if charitable or within limited non-charitable exceptions.

Question 56

What does Re Farepak show about Quistclose trusts?

Answer 56

A general purpose and failure to segregate funds may defeat the trust.

Question 57

What is the legal result if a trust fails for certainty?

Answer 57

The intended trustee may keep legal title; equitable duties do not arise.

Question 58

How does equity interpret ambiguous trust language?

Answer 58

By evaluating the overall context, facts, and behavior.

Question 59

What is the consequence if only part of a trust fails?

Answer 59

The remaining valid parts may still operate.

Question 60

What is meant by 'formalities' in trust law?

Answer 60

The legal requirements necessary to give an arrangement legal effect, such as writing or a deed.

Question 61

What are the three main gratuitous actions a legal owner can take?

Answer 61

Make a gift, declare a trust, or transfer on trust.

Question 62

Is a self-declaration of trust automatically constituted?

Answer 62

Yes, because the settlor retains legal title in a new capacity as trustee.

Question 63

What does 'transfer on trust' require?

Answer 63

The settlor must transfer legal title to the trustee, who holds it for the beneficiary.

Question 64

What formalities apply to a trust of personal property?

Answer 64

No specific formalities are needed for creating the equitable interest (Paul v Constance).

Question 65

What does s.53(1)(b) LPA 1925 require for land trusts?

Answer 65

A declaration must be manifested and proved by signed writing.

Question 66

Is s.53(1)(b) an evidential or substantive requirement?

Answer 66

It is an evidential requirement; the trust is unenforceable, not void, until satisfied.

Question 67

Who can sign the written evidence under s.53(1)(b)?

Answer 67

Preferably the settlor, but possibly the trustee—this point is unsettled.

Question 68

When does s.53(1)(b) not apply?

Answer 68

It does not apply to resulting, constructive, or statutory trusts (s.53(2) LPA 1925).

Question 69

What is constitution in trust law?

Answer 69

The process of transferring legal title to the trustee to complete the trust.

Question 70

What is the rule in Milroy v Lord?

Answer 70

Equity will not perfect an imperfect gift or treat it as a trust unless properly constituted.

Question 71

When is a trust void for lack of constitution?

Answer 71

When the settlor fails to transfer legal title using the correct method.

Question 72

What case shows that intent alone is not enough to create a trust?

Answer 72

Jones v Lock.

Question 73

What case supports the need for a deed to transfer a lease?

Answer 73

Richards v Delbridge.

Question 74

How is land transferred to constitute a trust?

Answer 74

By deed under s.52 LPA 1925 and registration under s.27 LRA 2002.

Question 75

How are shares transferred?

Answer 75

By signed stock transfer form and registration on the company’s internal register.

Question 76

How are chattels transferred?

Answer 76

By deed of gift or physical delivery with intention (Re Cole).

Question 77

What is required to transfer choses in action?

Answer 77

Written assignment and notice to debtor (s.136 LPA 1925).

Question 78

What did Re Rose establish?

Answer 78

If a donor has done everything in their power to transfer legal title, equity will perfect the transfer.

Question 79

How did Mascall v Mascall expand Re Rose?

Answer 79

It extended it to land and held that giving the recipient the documents was sufficient.

Question 80

What condition fails Re Rose according to Zeital v Kaye?

Answer 80

If the share certificate is not delivered, the donor has not done everything possible.

Question 81

Why did the transfer fail in Re Fry?

Answer 81

The donor did not obtain required Treasury consent before death.

Question 82

What did Pennington v Waine establish?

Answer 82

Equity can perfect a gift if it would be unconscionable for the donor to change their mind.

Question 83

Does the donee need to rely on the promise for unconscionability to apply?

Answer 83

Not necessarily (Khan v Mahmood).

Question 84

What key facts supported the ruling in Pennington v Waine?

Answer 84

The donee was told no further action was needed and became a company director relying on the gift.

Question 85

What is the rule in Strong v Bird?

Answer 85

A failed gift is perfected if the donee becomes executor and donor had continuous intent to give.

Question 86

What case applied Strong v Bird to imperfect gifts?

Answer 86

Re Stewart.

Question 87

What are the conditions for Strong v Bird to apply?

Answer 87

Intent to make an immediate gift, continuing intent until death, and donee becomes executor.

Question 88

What case ruled against future intention gifts under Strong v Bird?

Answer 88

Re Freeland.

Question 89

Can administrators also benefit under Strong v Bird?

Answer 89

Yes, per Re James, though it's controversial.

Question 90

What is a donatio mortis causa?

Answer 90

A gift made in contemplation of death, conditional on death, with delivery.

Question 91

What case sets out the conditions for DMC?

Answer 91

Cain v Moon.

Question 92

Is a general testamentary intention sufficient for DMC?

Answer 92

No; it must be in contemplation of imminent death.

Question 93

What delivery is required for a valid DMC?

Answer 93

Control over the property or a means of title transfer (Sen v Headley).

Question 94

What are the two perpetuity rules?

Answer 94

The rule against remoteness of vesting and the rule against inalienability.

Question 95

What does the Perpetuities and Accumulations Act 2009 specify?

Answer 95

A 125-year maximum perpetuity period.

Question 96

What does the 'wait and see' rule mean?

Answer 96

A trust can subsist until it’s clear the interest won’t vest within the perpetuity period.

Question 97

What is the rule against inalienability?

Answer 97

Non-charitable purpose trusts must end within a fixed period or they are void.

Question 98

Can charitable trusts be perpetual?

Answer 98

Yes, they are exempt from the perpetuity rules.

Question 99

What if a trust fails for perpetuity?

Answer 99

Any void interest is removed, and property may fall into a resulting trust.

Question 100

What is class closing under s.8 PAA 2009?

Answer 100

It removes objects whose interest would vest outside the perpetuity period.

Question 101

Why are express perpetuity clauses useful?

Answer 101

They avoid perpetuity issues by clearly limiting trust duration.

Question 102

What does the rule in Saunders v Vautier allow?

Answer 102

Beneficiaries with vested interests can terminate the trust early.