Chapter 2: Express Private Trust

• Express private trusts


  Trusts which are expressly created in English law
• Three certainties required for a valid trust

  • Certainty of intention
  • Certainty of subject matter
  • Certainty of objects
• Settlor


  The person who creates a trust
• Intention to create a trust


  Essential to the existence of an express trust
• Manifestation of intention to create a trust


  1. Settlor must show by written or spoken words, or by conduct, that they intend to subject the trustee to a binding obligation

  2. Communication of intent to the beneficiaries is not necessary
• Intention to create a trust


  • Must be manifested while settlor owns property and prior to transfer
  • Must intend trust take effect immediately
• Precatory expressions


  A settlor's expression of a hope, wish, or mere suggestion that the property be used in a certain way - usually do not create a valid trust
• Precatory expressions


  • "€100,000 to my son Stephen, with the hope that he shall provide education for my grandchildren"
• Valid trust


  • "£100,000 to my son Stephen, which is to pay expenses for the education of my grandchildren"
• Informal words or actions


  May show intention to create a trust - issue of proof
• Phrases indicating trust intention


  • "this money is as much your money as it is my money"
  • Joint withdrawals from a bank account for joint use
• Property passes as gift


  If intention to create a trust is uncertain
• Certainty of subject matter

  It must be clear what property is to be bound by the trust
• Phrases indicating uncertain subject matter

  • "the bulk of my estate"
  • "a reasonable income"
• Fractional shares


  A trust of a fractional share of an intangible asset is valid, but a trust of tangible property requires the assets to be segregated
• Segregation of trust property

  • Gold investments where some gold was segregated and claimed by certain investors, but unsegregated gold became part of the company's assets
• Trust property


  • Must be an existing interest in existing property, not a mere expectancy
• Vested future interest vs. mere expectancy

  • Vested future interest in a house deeded to Abigail for life and then to Benjamin

  Expectancy in Abigail's home that she intends to leave to Benjamin in her will
• Beneficial entitlement


  Must be certain, objective phrases like "reasonable income" are valid
• Uncertain beneficial entitlement


  • Two houses left in trust for two children, where one child is to choose a house first
• Property reverts to settlor


  If trust is void for uncertainty of subject matter
• Certainty of objects


  The beneficiaries of the trust must be defined with sufficient certainty
• Fixed trusts


  • Require a complete list of beneficiaries, who need not be in existence at the date of the trust
• Conceptual and evidential certainty

  Required for a complete list of beneficiaries in a fixed trust
• Fixed trust example


  • "£400,000 to be divided equally between my nieces and nephews"
• Discretionary trusts


  Require only that the description of the class of beneficiaries is clear enough to enable the court to decide whether the trustees have acted within their powers
• Discretionary trust example


  • "To Alex in trust for the children of Becky in accordance to their needs as Alex shall determine"

  "directors, ex-directors, their relatives, and their dependants"
• Discretionary trusts


  • Will fail if administratively unworkable, e.g. too many potential beneficiaries or no link between them
• Resulting trust


  If a trust is void for uncertainty of objects, a resulting trust in favour of the settlor or the settlor's successors is presumed
• Beneficiary principle


  A trust cannot exist without ascertainable human beneficiaries, except for charitable trusts
• Beneficiary principle example


  • Trust "on trust to preserve the freedom of the press" fails as it has no ascertainable beneficiaries
• Trustees


  • A trust will not fail because the trustee dies, refuses to accept appointment, or resigns - the court will appoint a successor trustee
• Qualifications to be a trustee

  Anyone who has capacity to acquire and hold property for their own benefit may be a trustee
• Example


  • In his will, T gives his estate to trustees "on trust to preserve the freedom of the press". The purpose does not fall within the requirements of the Charities Act. The trust offends the beneficiary principle and will fail. The trustees hold the property on resulting trust for T's estate which, if he has made no further provision in the will, passes to his next of kin on intestacy.
• Trustees


  • Once established, a trust will not fail because the trustee dies, refuses to accept appointment, or resigns. The court will appoint a successor trustee unless it is clear that the settlor intended the trust to continue only so long as a particular trustee served. However, the absence of a trustee at the creation of a trust may cause an attempted inter vivos trust to fail for lack of delivery.
• Qualifications to be a trustee

  Anyone who has capacity to acquire and hold property for their own benefit may be a trustee. A trustee may be a private individual, a professional person, or a trust corporation (a company whose object is to act as a trustee). However, a minor cannot be a trustee, even if the trust property is personal property.
• Number of trustees


  There is no minimum or maximum number of trustees required. A sole trustee may act, but appointing a minimum of two trustees has practical advantages, Trustees can observe one another's behaviour and highlight a breach of trust, and they can bring a second viewpoint to a trust decision. Because trustees are required to act with unanimity (unless the trust deed permits decision by majority), it is advisable not to appoint too many trustees.
• Trusts of Land


  • A trust of land usually must have at least two trustees (or a trustee that is a trust corporation), because at least two trustees are required to give a valid receipt for money received on the sale of land. However, a trust of land may have no more than four trustees.
• Elements of a valid private trust

  • Certainty of intention to create a trust (manifested by settlor's words, writing, or conduct)
  • Certainty of subject matter (property subject to the trust defined with certainty)
  • Certainty of objects (must be able to identify beneficiaries of fixed and discretionary trusts)
  • Trustee (inter vivos trusts only; a testamentary trust will not fail for lack of a trustee)
  • Ascertainable human beneficiaries (the beneficiary principle)
• Remoteness of Vesting Rule

  An interest under a trust is void if it does not vest within the perpetuity period. For trusts taking effect after 6 April 2010, the period is 125 years.