Trusts Unit 1 Flashcards
(20 cards)
What is a declaration of trust and what should it consist of?
A declaration of trust is essentially the instruction manual on how the trustees should run the trust, and ultimately who will benefit from it.
Should contain:
- who the trustees are
- what the trust property is
- who the beneficiaries are
- what powers and duties the trustees have in running the trust and administering the trust property.
Instructions to the trustees must be sufficiently certain and clear.
Certainty of intention
Settlor must have used words that impose a duty on someone to act as a trustee (to hold property for someone else).
Desirable to use the word trust but not necessary.
Precatory words do not create a trust - these words express a wish, hope or expectation.
Certainty of subject matter
The trust property must be described with certainty - must be identifiable. Future property (which they hope to own or will own in the future) does not count. Trust can only validly be created over property they currently own.
Can create a trust over part of a collection of items so long as the items are identical - only when intangible (like shares). Tangible items will need to be separated or they will fail - London Wine Co.
And the settlor must define the beneficaries’ interests with certainty.
Boyce v Boyce.
Certainty of objects
Beneficiaries need to be identified with sufficient certainty so the settlor knows to whom to distribute the property.
Fixed interest trusts - complete list test. Must be conceptually AND evidentially certain.
Discretionary trusts - ‘given postulant’ test (given individual test). Needs conceptual certainty but evidential certainty is not required.
Administrative Unworkability
When the class is so wide it forms something not anything like a class.
Not an issue for fixed trusts.
Capriciousness
Another hurdle that discretionary trusts face.
May be capricious if there is absolutely no rational reason for the trust or absolutely no rational basis on which the trustees can exercise their discretion to distribute trust property.
The beneficiary principle
For a trust to be valid, it must be for the benefit of individuals (subject to some exceptions).
Perpetuities
The rule on remoteness of vesting.
To be a valid trust, the beneficial interests under the trust must vest within the relevant perpetuity period.
For trusts created after 1 April 2010, the perpetuity period is 125 years.
Declarations of trust over land
Must comply with s53(1)(b) LPA 1925 - proved by some writing and signed by some person who is able to declare such a trust.
This applies to emails accordingly:
- an email is a written document
- the settlor declares the terms of the express trust in the email and they type their name in some way that counts as a signature (even if first name, initials, nickname or pre-made signature block).
- However, an email address by itself is not a signature.
A declaration of trust for s53 is allowed to be made orally as long as it is subsequently made in writing. When done so, must contain all material parts of the trust.
What makes an express trust enforceable?
The settlor makes a valid declaration of trust and puts assets into the trust. Once both steps done, the trust is constituted. If not constituted, no trust exists.
Can be constituted in 2 ways
- The settlor appoints themselves as the trustee for the beneficiary by making a valid declaration of trust.
- The settlor appoints someone else to be the trustee by making a valid declaration of trust and then transfers the legal title in the property over to that trustee.
Constituting a trust over land
The settlor must execute a deed and give that executed deed either to the trustee (to give to the Land Registry) or to the Land Registry direct.
Land Registry will then register the trustee as the new legal owner.
Legal title not transferred until all steps have been completed and the trustee is the new registered proprietor of the land.
Constituting a trust over shares
When dealing with designated public quoted shares, the CREST system is used and generally a stockbroker makes the transfer.
With all other shares, paperwork is required.
The settlor must execute a stock transfer form and give the executed stock transfer form and relevant share certificate either to the trustee (who will pass it onto the company) or send it to the company direct.
The company’s secretary will then register the trustee as the new shareholder in the register of members - then it is constituted.
Constituting a trust over money
Generally constitutes upon delivery.
If cash, passes on delivery. If electronically, passes on receipt. If cheque, passes when cleared (if settlor dies before then, the cheque cannot be cashed).
Constituting a trust over chattels
Constitutes upon physical delivery of the asset to the trustee or by deed.
Equity will not assist a volunteer
A volunteer is someone who has not provided consideration for the transfer of property. Beneficiaries are usually volunteers.
If a settlor has not followed the transfer rules properly, there will be no trust - equity will not assist a volunteer.
Exceptions to the maxim - the every effort test
Where the settlor did everything they could to transfer legal title the transfer may be regarded as complete in equity even if legal title not transferred completely.
Settlor must have completed all the steps they were required to take - all that is required is the act of a third party.
Sometimes even if the every effort test is not complete, equity may constitute the trust when it deems that it would be unconscionable for the settlor to back out of the trust. Based on Pennington v Waine.
The rule in Strong v Bird
- The settlor intended to create an immediate trust with a third party acting as trustee
- that trust was not immediately created due to a failure to comply with the relevant transfer rule
- the settlor’s intention continued up until their death
- the intended trustee acquired legal title to the trust property by becoming the settlor’s executor or administrator.
Settlor declares themselves and a third party to be trustees
The settlor must transfer the property from his own sole name into the joint names of him and the other trustees.
It would be unconscionable to allow him to back out of this trust.
Therefore him or his executors/administrators must put the property into the names of the surviving trustees.
