Key terms in Equity and Trusts

What is a trust?

A trust is where a person (the trustee) holds property for the benefit of another person (the beneficiary)

Who is the trustee?

The person who holds the legal title to the trust property (there may be more than one)

What is a third party trustee?

Where the settlor does not make a self-declaration of trust (appointing themself as trustee), they make a declaration of trust that appoints someone else as trustee; known as a third party trustee

Who is the beneficiary?

The person who reaps the benefit of the trust property (there may be more than one). Note that purpose trusts do not have a beneficiary.

An express trust is a trust made

Deliberately by the settlor either by deed, will or orally — Moore v Williamson [2011]

An express trust may be

1. Fixed — £250,000 to be divided equally between my two children, Amelia and Francis

2. Discretionary — £250,000 to be divided between my two children in such shares as my trustees think fit

1. Successive interest — My home at 3 Amble Grove to my daughter Amelia, and to my son Francis on Amelia’s passing

All trusts must have

1. Certain intention — the settlor must have intended to impose an obligation on the trustee to hold and deal with the property

2. Certain subject matter — the property to be subject to the trust must be clear

3. Certain object(s) — the person or people who is/are to benefit from the trust must be clear (for purpose trusts, the purpose which is to benefit from the trust must be clear)

What is a purpose trust?

A type of express trust which does not have a beneficiary as the object but a purpose instead

Difference between an express trust for a beneficiary and an express trust for a purpose

1. A beneficiary is a person with an equitable interest in the trust property. The trustee owes them duties and the beneficiary can go to court if the trustee fails to uphold their duties.

2. A purpose is an aim or activity. It has no legal personality so it cannot enforce a trust. Charitable purposes are allowed, with the Attorney General acting as the enforcer. Non-charitable purposes generally are not allowed.

What is a gift?

A gift is where property is transferred from a person (the donor) to another person (the donee)

A gift may either be

1. Absolute — £10,000 to my son James

2. Conditional — £10,000 to my son James if he marries