Trust Law L5: Core Concepts, Duties, and Claims

Comprehensive vocabulary flashcards covering the core legal concepts, statutory sections, and leading case authorities from the Trust Law Level 5 question bank.

Settlor

The party who creates the trust by transferring property to trustees or declaring themselves a trustee.

Trustee

The party who holds and manages legal title to trust property under an equitable duty to apply it exclusively for the benefit of the beneficiaries.

Beneficiary

The party who holds the equitable proprietary interest and benefits from the trust property.

Discretionary Trust

A trust arrangement where trustees hold distributive discretion and are under an imperative legal duty (obligation) to distribute the trust property among a class of objects.

Fixed Trust

A trust arrangement where the trustees have no distributive discretion and must distribute the trust property in the fixed proportions determined by the settlor.

Fiduciary Power

A power of appointment held by a trustee (coupled with a trust) that provides the discretion to distribute trust property to a wider class of objects without imposing an obligation to exercise it.

Certainty of Intention

The legal requirement that a settlor must intend to create the relationship characteristic of a trust; the settlor does not need to understand what a trust is legally (as confirmed in Paul v Constance).

Certainty of Subject Matter

A trust requirement comprising two elements: the trust property requirement (the property must be identifiable) and the beneficial entitlement requirement (each beneficiary's share must be ascertainable).

Rule in Hunter v Moss [1994] 1 WLR 452

The rule establishing that a valid trust can be declared over an unsegregated proportion of intangible property (such as shares of the same class in the same company) without identifying specific units.

Rule in In re Goldcorp [1995] 1 AC 74

The principle that a trust over a specified quantity of tangible items from a larger mass (such as gold bullion bars) is void for uncertainty of subject matter if the specific items are not segregated or identified.

Rule in Boyce v Boyce

The principle that an express trust fails for uncertainty of beneficial entitlement if the designated mechanism for determining a beneficiary's share cannot be exercised.

Interest Vested in Possession

A beneficial right giving the beneficiary immediate entitlement to the income or current physical enjoyment of the trust property.

Interest Vested in Interest

A present unconditional beneficial entitlement to trust capital where possession or enjoyment is postponed until a prior life interest ceases.

Contingent Interest

A beneficial interest that will only vest if and when a specified future condition is fulfilled (such as reaching a specific age or surviving another individual).

Rule in Saunders v Vautier

The rule permitting adult beneficiaries of sound mind who are together absolutely entitled to the trust fund to collectively terminate the trust and direct the transfer of the property.

Administrative Unworkability

A ground for invalidating a discretionary trust when the class of objects is so vast (such as all children living in the United Kingdom) that it cannot be sensibly administered by the trustees.

Resulting Trust

A trust that arises by operation of law when an attempted express trust fails for uncertainty of objects or subject matter, returning the beneficial interest to the settlor or the settlor's estate.

Section 36(6) Trustee Act 1925

The statutory provision allowing current trustees to appoint an additional trustee in writing, provided that the total number of trustees does not exceed four.

Section 19 TLATA 1996

The statutory provision under which adult beneficiaries of sound mind who are collectively absolutely entitled to the trust property can act together to remove and replace trustees.

Section 5 Trustee Act 2000

The statutory duty requiring trustees to obtain and consider proper advice before exercising powers of investment, unless they reasonably conclude it is unnecessary.

Section 8 Trustee Act 2000

The statutory power authorizing trustees to acquire freehold or leasehold land in the United Kingdom, which excludes acquiring land located abroad unless expressly authorized by the trust instrument.

Section 61 Trustee Act 1925

A statutory defence granting the court discretion to relieve a trustee from liability for breach of trust if they acted honestly and reasonably and ought fairly to be excused.

Falsifying the Account

An equitable remedy for an unauthorized disbursement where the beneficiary requires the trustees to reconstitute the trust fund by restoring the amount originally paid out.

Benjamin Order

A court order granting trustees permission to distribute trust funds on the presumption that a missing beneficiary has died, protecting trustees from personal liability if the beneficiary later appears.

Self-Dealing Rule

The equitable rule prohibiting a trustee from purchasing trust property from the trust without authorization from the trust deed or the fully informed consent of all beneficiaries.

Dishonest Assistance

A personal claim against a third party who dishonestly assists in the commission or concealment of a breach of trust, assessed according to an objective standard of dishonesty per Ivey v Genting Casinos.

Knowing Receipt

A personal, fault-based claim brought against a third party who receives misapplied trust property with knowledge that makes it unconscionable for them to retain the benefit.

Baden Scale

A five-point legal categorization of knowledge in accessory liability: (1) actual knowledge, (2) wilfully shutting eyes to the obvious, (3) wilfully and recklessly failing to inquire, (4) knowledge indicating facts to a reasonable person, and (5) knowledge putting a reasonable person on inquiry.

Bona Fide Purchaser for Value Without Notice

A party who acquires a legal interest in an asset for valuable consideration without notice of a trust, extinguishing any competing equitable proprietary claims against that asset.

Rule in Clayton's Case

The 'first-in, first-out' presumption for bank account withdrawals, which is inapplicable to wrongful mixtures of trust money and trustee funds, or where it creates an unfair result.

Rules in Re Hallett's Estate and Re Oatway

The equitable tracing presumptions for wrongful mixtures, providing that a defaulting trustee is deemed to dissipate their own money first and preserve trust funds in any surviving or appreciating assets.

Foskett v McKeown [2001] 1 AC 102

The leading House of Lords authority establishing that a beneficiary whose money was used to acquire an asset can elect between an equitable proprietary ownership claim or an equitable lien.