Equity and Trusts Cheat Page – Everything to know!
Trusts
- Trusts arise when the legal and equitable interests in property are divided
- Trusts are either express or implied
- Trusts create obligations and rights
- A variety of different interests can exist in trust property
2 types of trust
1. Express – private or public. Private express trusts are for the benefit of private individuals.
Public trusts will benefit members of the public. They are made expressly by a settlor either
inter vivos (during settlors’ lifetime) or testamentary (settlors will).
2. Implied – those which are not expressly created – resulting, constructive and statutory
Fixed or discretionary express trusts
Fixed – beneficiaries and their interests under the trust are clearly specified.
Discretionary – property is held on trust by the trustee who has some discretion over who is to
benefit, what that share of the trust property will be or both.
Bare trusts and protective trusts
Bare – when property is left on trust and the trustee has no discretion. The trustees only duty is to
hold the property for the beneficiary.
Protective – trusts aimed at preventing an irresponsible beneficiary from wasting trust property
The three certainties
Every trust must satisfy the three certainties of intention, subject matter and objects.
CERTAINTY OF INTENTION – is a trust intended?
CERTAINTY OF SUBJECT MATTER – what property is to be subject to the trust and what are the
beneficial interests?
CERTAINTY OF OBJECTS – who are the beneficiaries of the trust?
If express trust fails for uncertainty of objects – the trust fund results back to the settlor or if he is
dead to the testator
If express trust fails for uncertainty of intention – the donee takes the gift absolutely
When both the legal and equitable interest are transferred to a third party, this is not a disposition of
a subsiting equitable interest – nothing needs to be done.
Certainty of intention
, - Intention is established by considering al the circumstances of the case – equity looks to
intent rather than form
- Imperative or precatory language?
- Precatory words express a hope, a wish, or a moral obligation – indicates a gift is intended.
- Imperative words express a command – a duty to do something, indicate a trust is intended.
- If there is no intention to create a trust, the done will take the property absolutely as a gift.
Certainty of subject matter
- It must be clear what property is held on trust and the beneficial interests must be clear
- Trusts of part of a property – situation arises where there is an attempt to create a trust over
part of a bulk of tangible property, trust property will only be certain if it has been separated
from the rest
- The beneficial interests under the trust must be certain
- If there is a lack of certainty as to the subject matter of the trust, this will cast doubt on
whether the settlor truly intended to create a trust
- If there is a lack of certainty as to the subject matter the trust fails and the property will
return to the settlor or estate on resulting trust.
Certainty of objects (beneficiaries)
- Fixed trust – the beneficial interests are fixed; a full list of the beneficiaries MUST be able to
be created and all beneficiaries MUST be identified.
- Discretionary trust – this is a type of trust in which the trustee is given the power to appoint
people as beneficiaries of the trust, the beneficiaries of a discretionary trust MUST be said to
be conceptually certain (the group to benefit is clearly understood)
- Gift subject to a condition precedent do not require the same degree of conceptual certainty
as discretionary trusts. Vital to say whether any given individual is or is not a member of the
class.
- Administrative unworkability – trust may be void if the class is so wide that the trust would
be administratively unworkable e.g. all of inhabitants of County of west Yorkshire.
-
Constitution
- When a person transfers legal title to another, the legal title is said to vest in the other
person
- The general principle is that unless the property has been transferred by the correct legal
rules then the transfer fails – it is said to be imperfect.
- If the transferee has not given valuable consideration, that person is said to be a volunteer.
Context
- When a person has property, he or she is said to be the absolute owner. In simple, they have
the legal title and the beneficial (equitable) title.
- Three ways in which an absoulute owner of property can benefit another:
An outright gift
A transfer of legal title to a third person to hold on trust for the benefit of another
Trusts
- Trusts arise when the legal and equitable interests in property are divided
- Trusts are either express or implied
- Trusts create obligations and rights
- A variety of different interests can exist in trust property
2 types of trust
1. Express – private or public. Private express trusts are for the benefit of private individuals.
Public trusts will benefit members of the public. They are made expressly by a settlor either
inter vivos (during settlors’ lifetime) or testamentary (settlors will).
2. Implied – those which are not expressly created – resulting, constructive and statutory
Fixed or discretionary express trusts
Fixed – beneficiaries and their interests under the trust are clearly specified.
Discretionary – property is held on trust by the trustee who has some discretion over who is to
benefit, what that share of the trust property will be or both.
Bare trusts and protective trusts
Bare – when property is left on trust and the trustee has no discretion. The trustees only duty is to
hold the property for the beneficiary.
Protective – trusts aimed at preventing an irresponsible beneficiary from wasting trust property
The three certainties
Every trust must satisfy the three certainties of intention, subject matter and objects.
CERTAINTY OF INTENTION – is a trust intended?
CERTAINTY OF SUBJECT MATTER – what property is to be subject to the trust and what are the
beneficial interests?
CERTAINTY OF OBJECTS – who are the beneficiaries of the trust?
If express trust fails for uncertainty of objects – the trust fund results back to the settlor or if he is
dead to the testator
If express trust fails for uncertainty of intention – the donee takes the gift absolutely
When both the legal and equitable interest are transferred to a third party, this is not a disposition of
a subsiting equitable interest – nothing needs to be done.
Certainty of intention
, - Intention is established by considering al the circumstances of the case – equity looks to
intent rather than form
- Imperative or precatory language?
- Precatory words express a hope, a wish, or a moral obligation – indicates a gift is intended.
- Imperative words express a command – a duty to do something, indicate a trust is intended.
- If there is no intention to create a trust, the done will take the property absolutely as a gift.
Certainty of subject matter
- It must be clear what property is held on trust and the beneficial interests must be clear
- Trusts of part of a property – situation arises where there is an attempt to create a trust over
part of a bulk of tangible property, trust property will only be certain if it has been separated
from the rest
- The beneficial interests under the trust must be certain
- If there is a lack of certainty as to the subject matter of the trust, this will cast doubt on
whether the settlor truly intended to create a trust
- If there is a lack of certainty as to the subject matter the trust fails and the property will
return to the settlor or estate on resulting trust.
Certainty of objects (beneficiaries)
- Fixed trust – the beneficial interests are fixed; a full list of the beneficiaries MUST be able to
be created and all beneficiaries MUST be identified.
- Discretionary trust – this is a type of trust in which the trustee is given the power to appoint
people as beneficiaries of the trust, the beneficiaries of a discretionary trust MUST be said to
be conceptually certain (the group to benefit is clearly understood)
- Gift subject to a condition precedent do not require the same degree of conceptual certainty
as discretionary trusts. Vital to say whether any given individual is or is not a member of the
class.
- Administrative unworkability – trust may be void if the class is so wide that the trust would
be administratively unworkable e.g. all of inhabitants of County of west Yorkshire.
-
Constitution
- When a person transfers legal title to another, the legal title is said to vest in the other
person
- The general principle is that unless the property has been transferred by the correct legal
rules then the transfer fails – it is said to be imperfect.
- If the transferee has not given valuable consideration, that person is said to be a volunteer.
Context
- When a person has property, he or she is said to be the absolute owner. In simple, they have
the legal title and the beneficial (equitable) title.
- Three ways in which an absoulute owner of property can benefit another:
An outright gift
A transfer of legal title to a third person to hold on trust for the benefit of another
