Chapter 1 Trusts

1.2 Fixed interest trusts and Discretionary Trusts

Fixed

• Trustees have no discretion as to how trust property can be distributed

• Settlor has stipulated who beneficiaries are and what they are entitled to

Discretionary

• Trustees have discretion as to who receives what

• Settlor will usually indicate a class of people who may be entitled

1.3 The 3 certainties

• Trust is only valid 3 certainties are satisfied

• Certainty of Intention - Intention to create a trust

• Certainty of Subject Matter - Clear what property is held on trust

• Certainty of Objects - Clear who the beneficiaries are

Intention

• Precatory words do not make a trust, more likely a gift

Subject Matter

• Has to be property the settlor already owns - cannot be made over future property

• Must be identifiable

• Can create a trust over a collection of items, as long as they are all identical

Object

• Usually only an issue where it is a class of beneficiaries

• Test for certainty of objects in fixed trusts is complete list test - must be possible to make a list of all beneficiaries on the trust

  • To satisfy this test you need conceptual certainty (is description of the class clear and objective ) and evidential certainty (evidence to identify beneficiaries)

• Test for certainty of objects in a discretionary trust is the given postulant test - can it be said whether a given is individual is a member of the given class

  • Discretionary trusts only need conceptual certainty

Administrative Unworkability

• Even if a class is clear, if it is unworkably wide then it will be invalidated for administrative unworkability

1.4 The beneficiary Principle

• Must be for the benefit of individuals who are able to enforce trusts if necessary

1.5 Perpetuities

• Trusts can only be vested for a limit of 125 years

1.6 Formalities relating to the declaration of Trust

• For trusts in wills to be valid - the will must be valid

• For lifetime trusts, declaration of trusts can be made orally

• For trusts over land - declaration of trust must be in writing and signed by the settlor

• Written declarations of trusts: If A asserts B declared a trust in writing:

  • A has to prove B had signed the document

  • A has to show that the document when interpreted showed a declaration of trust

  • Objective Test

• Oral declarations of trusts: If A asserts B declared a trust orally:

  • A has to prove what B said

  • A has to show that this demonstrated an intention to create a trust

  • Subjective Test