In-Depth Notes on Trusts Law

Definition of a Trust

  • A trust involves the transfer of property ownership to a trustee, creating a fiduciary duty to manage and distribute the property according to the trust's purposes.

Key Players in a Trust

  • Truster: The individual who owns the property and creates the trust by transferring property to the trustee.
  • Trustee: The person who receives the property and is responsible for managing it in favor of the beneficiary.
  • Beneficiary: The person for whom the trust is created and who benefits from the trust assets.

Functions of a Trust

  • Fiduciary Ownership: The trustee has an obligation to manage trust assets according to the established purposes.
  • Rights of Beneficiaries:
    • Right to enforce the trust, demand distribution, and supervise the trustee's management.
    • The beneficiary has legal means to claim rights against the trustee if there is a breach of trust.

Example Scenario 1: Sale of Property

  • Participants: Anne (truster), Beth (beneficiary).
  • Transaction: Anne agrees to sell her house to Beth for £200,000.
  • Rights and Duties:
    • Anne has a duty to transfer the house to Beth, who has a right to the house upon payment of the price.
    • Beth pays the agreed price, and Anne conveys ownership of the house.

Example Scenario 2: Liability and Claims

  • Will of Trust in Financial Issues:
    • Specific assets and liabilities of a trustee and special trusts are managed separately from personal liabilities.
    • Trust Assets: £40,000 loan under special trust.
    • Trustee's General Patrimony: Includes personal liabilities such as loans or debts.

Breach of Trust and Legal Implications

  • Breach of Trust: Occurs when the trustee does not fulfill their obligations:
    • Beneficiary may claim against the trustee’s general patrimony for breach.
    • In case of multiple trustees, liabilities follow each trustee’s patrimony.
  • Protection Against Claims: Trust assets are separated from trustees' personal liabilities in cases of insolvency, protecting the assets from personal creditors.

Types of Trusts

  • Inter vivos trusts: Created during a person’s lifetime.
  • Mortis causa (testamentary) trusts: Created upon a person's death.
  • Private trusts: Benefiting private individuals.
  • Public trusts: Created for public benefit.
  • Charitable trusts: Established for charitable purposes.
  • Discretionary trusts: Provide trustees with discretion to decide how to distribute assets.
  • Constructive trusts: Imposed by the court to address unjust enrichment situations.