Requirements for an express trust PDF

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The Law of Trusts Requirements of an express trust, the effect of Wills and Dispositions of property

Requirements of private express trusts. These include: 1. There must be an intention to create a trust. 2.

There must be certainty as to the property forming the ‘subject matter’ of the trust.

3.

The trust must have beneficiaries (‘objects’).

4.

The identities of the beneficiaries must be certain.

5.

There must be certainty as to the share each beneficiary is entitled to receive (unless the trust is a ‘discretionary trust’.)

6.

The correct formalities (written requirements) must be observed in relation to the declaration of trust in some instances.

The effect of wills 1.

A will ‘speaks from the moment of death’; therefore any property that has been disposed of prior to death will not pass under the will. If the property was subject to a binding obligation for disposal, this will bind the executor. Property can be disposed of by declaring a trust over it. If a valid and binding trust has been declared over some property prior to death, the personal representative(s) (known as ‘executors’) will hold title to the property, subject to the trust.

2.

A will is always revocable up to the moment of death. Therefore any subsequent disposals of property (i.e. after execution of the will but prior to death) are not subject to the will. If, for example, I leave a specific gift of my ‘Rolls-Royce car’ to my friend in my will but sell it during my lifetime, my friend receives nothing under my will. If I buy a BMW with the sale proceeds, my friend receives nothing.

3.

Title to the deceased’s property passes automatically to the personal representative on death who are then required to distribute the property according to the terms of the will or, if there is no will, the intestacy provisions. If the deceased was a trustee of property immediately prior to death, the personal representative will (usually) become the new trustee of the trust property.

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The Law of Trusts Requirements of an express trust, the effect of Wills and Dispositions of property

Dispositions of Property A property owner may wish to dispose of her property outright, or to put this in another way, to dispose of the whole of her rights in her property. This disposition of the property, or of the property owner’s rights in the property, may be made for a variety of reasons. It may be that the whole of the owner’s interests in the property are to be sold, which would normally be described as the sale of the property. It may be that all of these interests are to be exchanged for some interests in another item of property. A contract for sale is a contract to transfer property for a money price, a contract of exchange is a contract to transfer property for a compensating transfer of other property, sometimes known as barter. It may be that all of the interests of the property owner are to be transferred for no consideration. Such a transfer is a gift of property. All of these dispositions deal with the whole of the rights of a property owner in respect of the property transferred. A loan of money falls into this category, as the money lent belongs to the borrower, the lender has a debt obligation in exchange.

Partial disposition of the property. A property owner may wish to dispose of some of her rights in her property. A common right that is disposed of is the right to possession for a period of time. It is common to come across owners of land and goods who have disposed temporarily of their right to possession of their property.

Partial disposition of property by declaration of trust. A declaration of trust is another example of a disposition of some of an owner’s rights. The disposition is not of the right to possession (see seminar one) but of the equitable interest in the property. A trust may be declared for a consideration, or gratuitously i.e. without any consideration for the declaration of trust. When a trust is declared the equitable owners have a property interest in the trust property. Just as no one talks of the freehold owner-occupier of land as having in effect the rights that would arise from a lease and reversion of his land, so one does not talk about an absolute owner of land having the legal title and the equitable title held on trust for himself. The disposition of the owner, by creating a lease or by creating a trust, creates a new property interest, by transferring rights that were previously enjoyed by the owner as owner. A declaration of trusts similarly creates a new property interest which is an equitable interest. Just as the lease is an item of property the tenant might transfer to someone else, so is an interest under a trust. Just as the original owner could transfer some rights, but not all, and

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The Law of Trusts Requirements of an express trust, the effect of Wills and Dispositions of property

create a lease or a trust, so might the tenant or beneficiary. A lease of a lease is called a sublease. A trust of a trust is called a sub-trust.

The nature of equitable property rights. There is a structural difference between the nature of the rights of a tenant and the nature of the rights of a beneficial owner. A tenant is a legal owner, and his rights bind the whole world. A beneficiary under a trust is an equitable owner, and his rights bind the whole world except a bona fide purchaser of a legal interest in the property without notice of the beneficiary’s interest. Once we add the trust to our classification of different types of property we add a new dimension to our system. We are not just adding a new type of property, another chose in action to our already long list of choses in action. We are adding a new way of owning. It is now no longer sensible to talk of the owner. When a trust exists we will have to talk of the owner at law (the legal owner)‘ and the owner in equity (‘equitable owner’ or ‘beneficial owner’).

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