LAW501 tuto validity of trust & protective trust PDF

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Summary

LAW501 tuto week 31. Last month, Samiba informed her cousin, Rose, that her mansion in Shah Alam would belong to Rose when she reaches 21 years old. In the meantime, the mansion would be transferred to Racita, a banker attached with MBB. The title deed of the mansion was handed to Racita who has kep...

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LAW501 tuto week 3

1. Last month, Samiba informed her cousin, Rose, that her mansion in Shah Alam would belong to Rose when she reaches 21 years old. In the meantime, the mansion would be transferred to Racita, a banker attached with MBB. The title deed of the mansion was handed to Racita who has kept the deed in a safe in MBB. Last week, Racita used the title deed to raise money via a loan with MBB. Rose was livid and wants to sue Racita for breach of trust. Advise Racita. -

Question of fact – whether there is a valid declaration of trust Surrounding circumstances, language, conduct of parties Conduct of parties – suggest no valid trust as the legal title is not transferred properly No appointment of trustee No valid declaration of trust No proper transfer of legal title – equitable title cannot flow from settlor (samiba) to beneficiary (rose) When there is no trust – there can be no action to sue for breach of trust Valid transfer of legal title – proper procedure in National Land Code Whether racita can raise money using the title deed depends on the purpose of the title deeds

The issue is whether there is a declaration of trust between Samiba and Rose. A trust is where a trustee holds the title to property on trust for one or more beneficiaries. In order to create a trust, there must be a trust property to be protected.The trustee is under a duty to administer the trust property on behalf of the beneficiaries and to distribute the property accordingly to the beneficial interests laid down by the settlor. The legal title will be transferred to the trustee while the equitable title will be transferred to the beneficiary and the settlor will end up with zero title. There would only be trustees and beneficiaries the moment a trust is created. From the question, the trust property is Samiba’s mansion in Shah Alam. Samiba is the settlor as she has settled her property for Rose, who is the beneficiary and will hold the equitable title. Rose will be entitled to the capital upon reaching the age of 21 years old. Racita is not a trustee as she only holds the title deed of the mansion and not the legal title for the trust property. An inter-vivos trust is a trust created during the settlor’s lifetime and not upon the settlor’s death. An inter-vivos trust can be oral or in writing. However, declaration of trust on intervivos over land must follow the formalities or otherwise the trust is not valid. According to Section 53(1)(b) of the Law of Property Act 1925, a declaration of trust respecting any land or any interest must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will. From the question, as the trust property is land, which is Samiba’s mansion in Shah Alam, the declaration of trust requires formalities which are in the form of writing. (not relevant)

From the question, there is no declaration of trust between Samiba and Rose as she merely informed Rose that the mansion will be transferred to her without following any formalities under s 53(1)(b) of the LPA. Since there are no formalities in the form of writing, the trust is not valid. Thus, Racita cannot be sued for breach of trust by Rose as there is no declaration of trust that the property will be transferred to Rose and because Racita is not a trustee and did not hold the legal title of the property. In conclusion, there is no declaration of trust between Samiba and Rose. 2. Explain how the protective trust protects in beneficiaries in a trust. -

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Governed by common law and sec 8 of trustee act To protect the interest of the beneficiaries Trustee will follow the terms laid down by the settlor so that the beneficiaries can enjoy the benefits of the trust without indulging in their spendthrift habit When settlor drafts to trustee, all beneficiaries can vote to defeat the trust or get the trustee to change the terms of the trust in accordance to their wishes – saunders v vautier Protective trust – Settlor can appoint himself or trustee as beneficiary – vote not to have the trust fund ended – no 100% vote, cannot invoke saunders v vauntier Sui juris – age of majority, sound innocence to invoke the rule in saunders v vauntier

In order to give protection to beneficiaries, a protective trust automatically converts into a discretionary trust, under which the beneficiary has no right to the income if ought to have done things which breaches a condition specified in the document creating the trust. A discretionary trust is where distributions are made at someone else's discretion, namely the trustee. They're not certain with respect to when and how they'll be transferred to beneficiaries, and beneficiaries have no control over and can't demand distributions. The protective trust enables the settlor to divest himself of ownership over the property but still be able to control its distribution. It also enables the trustee to provide for unforeseen circumstances and to provide financial aid based on need and most importantly, it protect the misspending of the trust property from wasteful beneficiaries. Furthermore, it prevent the effects of bankruptcy as the beneficiary owns nothing which he can sell or which his creditors can seize since property would be vested in him upon the exercise of the trustees discretion in his favour....