Trusts: Formalities and perpetuity

What formalties are required for a trust of land?

1. Manifested and proved

2. Some writing

3. Signed by some person who is able to declare such trust

4. By will

What happens if the trust formalities are not complied with?

The trust is unenforceable rather than void.

What happens if an unenforceable trust exists?

Exists from the moment the trust is declared but the beneficiary cannot enforce their rights unless the formalities are satisfied.

If the formalities are never satisfied?

As a basic rule, the trust will not become enforceable.

What is constitution?

Refers to the transfer of legal title from one party to another.

What about self-declaration of trusts?

Does not require any movement of the legal title as legal title to the property is already vested in the settlor.

What happens if a trust is created in a will (testamentary trust)?

Constitution takes places via the will.

What happens in a lifetime trust (inter vivos trust)?

Legal title must be transferred using the correct method

How can registered land transfers be transferred?

By deed and registered with the LPA

How are shares transferred?

Transferor must sign a stock transfer form and send it to the company.

How are choses in action (debts and money in the bank) transferred?

By notice in writing to the debtor or to the bank.

How are chattels transferred?

Deed of gift or delivery of the chattel with evidence of the transferor's intention to transfer

How are cheques transferred?

May be transferred to a third party by the transferor endorsing the cheque by signing their name on the back.

What is the effect of constitution?

The disposition is permanent.

Once a trust is constituted the settlor ceases to have beneficial or legal interest in the trust property. The trustee has legal title and holds it on trust for the beneficiary.

same with gifts

What if there is failed constitution?

If trust property is not vested in the trustees, the trust is incompletely constituted and is void.

What is the rule in Milroy v Lord?

Where no consideration is given and a transfer of property is incompletely constituted, equity will not assist a volunteer by compelling the settlor/donor to transfer legal title to the trustee/donee

What are the 3 methods of transferring property?

1. An outright gift

2. A transfer on trust

3. A self-declaration on trust

What are exception to the rule in Milroy v Lord?

1. Principle in Re Rose

2. The unconscionable principle

3. Fortuitous vesting

4. Donations mortis causa

What is the rule in Re Rose?

1. Correct method of transfer had been used.

2. Transferor did everything in his power to effect the transfer

3. The documentation ended up in the hands of the person capable of effecting the legal transfer

What happens if the transferor sent the documents to their own agent?

Would not be sufficient to be put beyond the control of the transferor as agency is revocable.

What is the unconscionable principle?

Equity can perfect an imperfect gift whenever it would be unconscionable for the donor to retract from it.

What is fortuitous vesting (rule in Strong v Bird)?

Failure to perfect intended recipient's title can be cured if they obtain legal title through another route. E.g. intended recipient is also personal representative of the estate.

What conditions must be met for the rule in Strong v Bird to apply?

1. Intention to make an immediate gift

2. Intention must continue until the donor's death

3. Intended donee becomes an executor of the donor's estate

What are the conditions for a valid DMC?

1. Gift is made in contemplation of death

2. The gift is conditional on death

3. There is delivery of the property

Does a valid DMC require full transfer of legal title?

No, provided the donor parts with control of the property.

What are the perpetuity rules?

1. The rule against remoteness of vesting

2. The rule against inalienability

Who does the rule against remoteness apply to?

People or charities as their objects

What does the rule against inalienability apply to?

Only applies to the operation of non-charitable purpose trusts

What is the rule against remotness of vesting?

A person must obtain a vested interest in the trust property with a recognised perpetuity period. (Period is 125 years).

What is the wait and see rule?

A trust can subsist until it becomes apparent that the interest cannot vest within the perpetuity period

What are the class closing rules?

Can save a trust by excluding objects who might otherwise cause the trust to fail because their interest would vest outside the perpetuity period.

What is the common law perpetuity period?

21 years

Is there a wait and see rule for the common law perpetuity period?

No, it must be clear from the outset that the trust will come to an end within the common law perpetuity period.

How can the common law perpetuity period be extended?

By reference to a life in being e.g. a royal