The Trust Concept

• What is a trust?

  A trust is a legal arrangement where one party holds property for the benefit of another.
• What did Professor Maitland suggest about the trust idea in his essay 'The Unincorporated Body'?

  He suggested that the development of the trust idea is one of the greatest achievements in English jurisprudence.
• According to Hanbury & Martin’s Modern Equity, how should a trust be approached?

  A trust is better described than defined, as definitions have been largely unsuccessful.
• What does Virgo’s The Principles of Equity & Trusts say about the nature of trusts?

  It states that understanding trusts is essential to grasping equitable principles and policies.
• What does Ramjohn’s Unlocking Equity & Trusts say about defining a trust?

  It emphasizes that defining a trust is difficult due to the variety of trusts that exist.
• How does Maitland define a trust?

  A trust exists when a person has rights to exercise on behalf of another or for a specific purpose, making them a trustee.
• What does the Recognition of Trusts Act 1987 define as a trust?

  A trust is a legal relationship created when assets are placed under the control of a trustee for the benefit of a beneficiary.
• What does the Recognition of Trusts Act 1987 indicate about the timing of trusts?

  Trusts can be established during a person's lifetime or come into effect after death through a will.
• How does the Recognition of Trusts Act 1987 categorize trusts?

  The Act suggests that a trust is a type of obligation involving the separation of assets from the settlor's estate.
• What international agreement did the UK ratify in relation to trusts?

  The UK ratified the 1984 Hague Convention on the Law Applicable to Trusts and their Recognition.
• What are some types of trusts mentioned in the study material?

  Types of trusts include express trusts, fixed trusts, discretionary trusts, and testamentary trusts.
• What is an express trust?

  • An express trust is created explicitly by the settlor.
  • It binds the trustee to manage identifiable property for the benefit of others.
  • Obligations may be for the benefit of persons with proprietary rights or for a specific enforceable purpose.
• What are some functions of trusts?

  Trusts serve functions such as estate planning, asset protection, charity, investment, and tax avoidance.
• How do trusts assist in estate planning and asset protection?

  Trusts manage property and transfer it to beneficiaries after the settlor's death without going through probate.
• How do trusts provide for minors or disabled dependents?

  Trusts can hold property for minors or disabled dependents, protecting it from liability or loss.
• What is asset partitioning in the context of trusts?

  Asset partitioning allows different rights in a single asset, enabling successive rights to be established.
• What is the beneficiary principle in relation to charitable trusts?

  The beneficiary principle states that trust property must be left to identifiable human beneficiaries, but charitable trusts are an exception.
• How do trusts function in investment contexts?

  Trusts allow groups of investors to pool funds and have them professionally managed by a trustee with fiduciary duties.
• How can trusts be used for tax avoidance?

  Trusts can mitigate or avoid tax liability by transferring property to trustees, potentially lowering the tax rate for the settlor.
• What is the difference between a gift and a trust in terms of ownership?

  A gift transfers ownership absolutely, while a trust splits ownership between the trustee and the beneficiary.
• What is the historical significance of the medieval “use” in relation to trusts?

  The medieval “use” is considered the forerunner of the modern trust.
• How did the feudal system influence the development of trusts?

  The feudal system created a social structure that necessitated the development of trusts for property management and transfer.
• What was the effect of the Statute of Uses 1536 on the concept of uses?

  The Statute of Uses 1536 undermined the use, rendering it unable to assign beneficial title and executing all uses.
• What caused the Chancery to begin recognizing trusts?

  The shift from an agricultural society to an industrial one prompted the Chancery to recognize trusts due to emerging sources of wealth.
• What are the four fundamental principles that characterize a trust according to Lord Browne-Wilkinson?

  The four fundamental principles are conscience, obligation, equitable title, and legal title.
• What is a "Use upon a Use" in legal terms?

  It refers to a structure like "to A to the use of B to the use of C."
• How was the second part of the "Use upon a Use" recognized?

  It was recognized by the Chancery following the Statute.
• What regulatory changes did the Chancery recognize regarding trusts?

  • The Chancery began to recognize the trust.
  • This change was influenced by the UK's shift from an agricultural to an industrial society.
  • The Industrial Revolution introduced new sources of wealth, including industrial production, trade, and finance.
• What did Lord Browne-Wilkinson state about the essential features of trusts?

  He identified four fundamental principles that characterize the trust.
• What is the first principle that characterizes a trust according to Lord Browne-Wilkinson?

  • Principle (i): Conscience
  • Equity operates on the conscience of the legal owner.
  • The legal owner must carry out the purposes for which the property was vested.
• What does equity require from the legal owner in a trust?

  Equity requires the legal owner to carry out the purposes for which the property was vested.
• What role does a trustee play in a trust?

  A trustee is considered a fiduciary by virtue of their office.
• What is the second principle that characterizes a trust?

  • Principle (ii): Factual awareness
  • A trustee cannot be unaware of the facts affecting their conscience.
  • Awareness is necessary for the trustee to hold property for the benefit of others.
• What does "unconscionable" mean in the context of trusts?

  It refers to something that is not fair or reasonable.
• What defines a fiduciary relationship in law?

  A fiduciary relationship requires one party to act with undivided loyalty to another party.
• What is the third principle that characterizes a trust?

  • Principle (iii): Identifiable trust property
  • There must be identifiable trust property to establish a trust.
  • The only exception is a constructive trust imposed on someone who dishonestly assists in a breach of trust.
• What is required for a trust to exist?

  There must be trust property for a trust to exist.
• What is the fourth principle that characterizes a trust?

  • Principle (iv): From the date of creation
  • The beneficiary has a proprietary interest in the trust property from the date the trust is established.
  • This interest is enforceable against subsequent holders of the property.
• What are the two components of trusts according to Virgo?

  The two components are the 'property' component and the 'obligation' component.
• What does "inter vivos" mean in the context of trusts?

  • "Inter vivos" means during the settlor's lifetime.
  • Trusts can be enforced during someone's lifetime or after death.
  • They can be created by deed, writing, orally, or by conduct.