1. Module 1 – Defining and Classifying trusts (Exam Q – explain modern trusts):
Parties to trust:
- Settlor/testator (absolute owner) create by a trust – either in lifetime (settlement) or
on death – transfer legal title to trustees
- Trustees – hold assets on trust for beneficiaries (settlor can be trustee) and have
personal obligations in respect of trust funds
- Beneficiaries – benefit from trust fund (Trustee can be beneficiary vice versa) and
have equitable interest
Creation:
- Lifetime trust can be created informally i.e orally but can create doubt with regard to
terms
- Ideally a document creates a trust – trust of land needs to be in writing and
settlements are usually created by deed – which is witnessed. The settlements are
usually long and complicated - they set out rules and regulations of the trust.
- Using modern language is appreciated by client
- When create – must have three certainties – intention (make sure use appropriate
words to create trust rather than expressing wish), subject matter (identity property
falling into trust and extent of Bs interest) and objects (who are beneficiaries and
whether by name, class or description)
- All trusts must be constituted – transfer legal title to trustees and settlor has to take
all reasonable steps to transfer – depending on asset will determine how to transfer –
land i.e transfer with Land Registry or stocks/shares i.e stock transfer form
- If create a trust – separation between legal title (to trustees) and equitable title which
is right of enjoyment (to beneficiaries)
- Statutory trust – intestacy or trusts of land
Classification of trusts:
- Statutory – intestacy (s23 AEA 1925/LPA 1925-beneficial joint tenancy/tenants in
common)
- Express – create in lifetime or within will
- Implied -Constructive/Resulting
- Purpose – charitable or non-charitable
- Private/public/charitable
- Taxation – QIIP or RPR
2. Module 2 – Creating a Valid trust (Popular exam Q):
- Three certainties (Knight v Knight 1840 – case established necessity of three
certainties- imperative words, not essential for word trust to be used):
, o Intention to create trust – must be obligation on T to hold trust property for B
(fiduciary relationship) rather than a wish for someone to do something - do
not need to use the word on trust but preferable to do so
Intention/words i.e precatory words (Re Adams 1884 – to my wish
absolutely if full confidence that was not seen as a trust and wife
took absolutely)
Action (Re Kayford 1975 – account set up to hold money for
customers on bankruptcy account held on resulting trust for
customers and not for creditors)
o Subject matter – must identify what is and is not trust property with
reasonable certainty and beneficiaries’ interest (Palmer v Simmonds – ‘bulk
of my estate’ was not ascertainable so failed) (Boyce v Boyce 1849 – Bs
left to choose something but B1 died before choosing so failed as
uncertain what B2 would choose as not clear what got what) (Sprange v
Barnard 1789 – anything left after use of my husband failed as uncertain
so everything passed to husband) (Re Goley – one of my flats)
o Objects – who are the beneficiaries and what are their interests to be able
transfer assets (fixed interest (IRC v Broadway 1955 – complete list
test/non-fixed (McPhail v Doulton 1971- conceptual certainty (my old
friends is a vague term – Brown v Gould/relatives means statutory next
of kin – Baden No 2- , colleagues of certain company), evidential
certainty (i.e grandchildren – birth certificate showing parents) and
administrative workability (not too wide)) – does not apply to charities
o When fails – what happens? Resulting trust back to settlor or could be
absolute gift
- Legal formalities – depending on asset – transfer of land must be evidenced in
writing (s23 LPA 1925/s53 LPMPA) or evidenced in writing depending if deal with
legal or equitable interest (s531© LPMPA must be in writing) but chattels need to be
in writing can be oral– if in Will then need to comply with s9WA 1837 Resulting and
constructive trusts (Paul v Constance – no document)
- Constitution – settlor must do all they can to transfer assets to trustee then it will bind
trustee (Milroy v Lord 1862 – rule for gift or constitute trust by correct method
appropriate to type of property)– shares (stock transfer form), land (in writing),
chattels (by deliverance) if not transfer properly then equity does not step in to help
(equity not assist a volunteer/equity will not perfect and imperfect gift) exceptions
marriage consideration (Re Densham 1975 – three conditions/Pullan v Koe
1913/A-G v Jacobs-Smith 1895/Re Plumptre’s Marriage Settlement 1910),
Strong v Bird 1874- incomplete gift to PR, they can perfect gift on death/Re
James 1935 – applies to administrators too/ Re Roley 1964 – extends to all
property i.e if asset outside of estate such as pay out of life policy), proprietary
estoppel (need all elements – promise, reliance and detriment), Donatio Mortis
, Causa -equity perfect gift even though the transfer hasn’t fully taken place (Kane v
Moon – three rules for DMC/Sen v Hedley – can pass unregistered land by
giving deeds and keys)
- Perpetuities and accumulations
- Secret trusts (include in will but operates outside the will- clear evidence of intention,
communication of terms and acceptance)– fully e.g £1,000 to Ian (if die then gift will
lapse) or half £1,000 to Ian for the purposes he knows about (Re Smithwaite -if die
then provided terms are known then can appoint trustee but Re Maddock- if no
known terms then fails) -if B predeceases then goes into B’s estate
3. Module 3 – Perpetuities and Accumulations (Exam Q on own is rare but usually 5/6
marks of another Q):
- Against remoteness of vesting so assets left are not in trust for too long of a period
as against public policy for assets to be tied up indefinitely– interests must take effect
within defined period but exception of charitable trusts
- Rule against excessive accumulation of income over excessive period
- S5 PAA 2009 - Post 6th April 2010 – 125 years (important is date of document)- not
need to be expressly in the document / s7 Wait and See/s8 Class Reduction
- PAA 1964 - Prior to 2010 date – up to 80 years – have to be expressly stated in
document and if not then reliant on common law
- Common law – life in being plus 21 years
- Royal lives – instead a B being life in being, refer back to descendants of George V
being last survivor of them plus 21 years
- Vested (interest is certain even if it occurs at some point in the future) v Contingent
interests (gives no rights unless or until some future event happens – even will be
either inside or outside of perpetuity period)
- Accumulation – pre 2010 (s13 PAA 1964 – broadly 21 years from a point in time,
must be in perpetuity period or void/ can be partially valid and partially void- to
residuary or partial intestacy or result back to settlor if in lifetime) and post
2010 (s13 PAA 2009 – unlimited up to 125 years)
4. Module 4 – Fixed Interest Trust:
- Life interests (Interest in Possession) – A for life then to B - LT has right to the
income during lifetime, or event or fixed period, when period ends i.e death or
satisfaction of condition then assets revert to remainderman – advance capital to
remainderman under s32 TA 1925 but note s8 ITPA 2014 for post 2014 documents
(in Will – QIIP/lifetime – RPR), appointments are overriding powers either to benefit
LT or B but need to look at terms of trust and partition (Saunders v Vautier 1841 -
where all Bs are entitled to whole trust property between themselves i.e LT and
Parties to trust:
- Settlor/testator (absolute owner) create by a trust – either in lifetime (settlement) or
on death – transfer legal title to trustees
- Trustees – hold assets on trust for beneficiaries (settlor can be trustee) and have
personal obligations in respect of trust funds
- Beneficiaries – benefit from trust fund (Trustee can be beneficiary vice versa) and
have equitable interest
Creation:
- Lifetime trust can be created informally i.e orally but can create doubt with regard to
terms
- Ideally a document creates a trust – trust of land needs to be in writing and
settlements are usually created by deed – which is witnessed. The settlements are
usually long and complicated - they set out rules and regulations of the trust.
- Using modern language is appreciated by client
- When create – must have three certainties – intention (make sure use appropriate
words to create trust rather than expressing wish), subject matter (identity property
falling into trust and extent of Bs interest) and objects (who are beneficiaries and
whether by name, class or description)
- All trusts must be constituted – transfer legal title to trustees and settlor has to take
all reasonable steps to transfer – depending on asset will determine how to transfer –
land i.e transfer with Land Registry or stocks/shares i.e stock transfer form
- If create a trust – separation between legal title (to trustees) and equitable title which
is right of enjoyment (to beneficiaries)
- Statutory trust – intestacy or trusts of land
Classification of trusts:
- Statutory – intestacy (s23 AEA 1925/LPA 1925-beneficial joint tenancy/tenants in
common)
- Express – create in lifetime or within will
- Implied -Constructive/Resulting
- Purpose – charitable or non-charitable
- Private/public/charitable
- Taxation – QIIP or RPR
2. Module 2 – Creating a Valid trust (Popular exam Q):
- Three certainties (Knight v Knight 1840 – case established necessity of three
certainties- imperative words, not essential for word trust to be used):
, o Intention to create trust – must be obligation on T to hold trust property for B
(fiduciary relationship) rather than a wish for someone to do something - do
not need to use the word on trust but preferable to do so
Intention/words i.e precatory words (Re Adams 1884 – to my wish
absolutely if full confidence that was not seen as a trust and wife
took absolutely)
Action (Re Kayford 1975 – account set up to hold money for
customers on bankruptcy account held on resulting trust for
customers and not for creditors)
o Subject matter – must identify what is and is not trust property with
reasonable certainty and beneficiaries’ interest (Palmer v Simmonds – ‘bulk
of my estate’ was not ascertainable so failed) (Boyce v Boyce 1849 – Bs
left to choose something but B1 died before choosing so failed as
uncertain what B2 would choose as not clear what got what) (Sprange v
Barnard 1789 – anything left after use of my husband failed as uncertain
so everything passed to husband) (Re Goley – one of my flats)
o Objects – who are the beneficiaries and what are their interests to be able
transfer assets (fixed interest (IRC v Broadway 1955 – complete list
test/non-fixed (McPhail v Doulton 1971- conceptual certainty (my old
friends is a vague term – Brown v Gould/relatives means statutory next
of kin – Baden No 2- , colleagues of certain company), evidential
certainty (i.e grandchildren – birth certificate showing parents) and
administrative workability (not too wide)) – does not apply to charities
o When fails – what happens? Resulting trust back to settlor or could be
absolute gift
- Legal formalities – depending on asset – transfer of land must be evidenced in
writing (s23 LPA 1925/s53 LPMPA) or evidenced in writing depending if deal with
legal or equitable interest (s531© LPMPA must be in writing) but chattels need to be
in writing can be oral– if in Will then need to comply with s9WA 1837 Resulting and
constructive trusts (Paul v Constance – no document)
- Constitution – settlor must do all they can to transfer assets to trustee then it will bind
trustee (Milroy v Lord 1862 – rule for gift or constitute trust by correct method
appropriate to type of property)– shares (stock transfer form), land (in writing),
chattels (by deliverance) if not transfer properly then equity does not step in to help
(equity not assist a volunteer/equity will not perfect and imperfect gift) exceptions
marriage consideration (Re Densham 1975 – three conditions/Pullan v Koe
1913/A-G v Jacobs-Smith 1895/Re Plumptre’s Marriage Settlement 1910),
Strong v Bird 1874- incomplete gift to PR, they can perfect gift on death/Re
James 1935 – applies to administrators too/ Re Roley 1964 – extends to all
property i.e if asset outside of estate such as pay out of life policy), proprietary
estoppel (need all elements – promise, reliance and detriment), Donatio Mortis
, Causa -equity perfect gift even though the transfer hasn’t fully taken place (Kane v
Moon – three rules for DMC/Sen v Hedley – can pass unregistered land by
giving deeds and keys)
- Perpetuities and accumulations
- Secret trusts (include in will but operates outside the will- clear evidence of intention,
communication of terms and acceptance)– fully e.g £1,000 to Ian (if die then gift will
lapse) or half £1,000 to Ian for the purposes he knows about (Re Smithwaite -if die
then provided terms are known then can appoint trustee but Re Maddock- if no
known terms then fails) -if B predeceases then goes into B’s estate
3. Module 3 – Perpetuities and Accumulations (Exam Q on own is rare but usually 5/6
marks of another Q):
- Against remoteness of vesting so assets left are not in trust for too long of a period
as against public policy for assets to be tied up indefinitely– interests must take effect
within defined period but exception of charitable trusts
- Rule against excessive accumulation of income over excessive period
- S5 PAA 2009 - Post 6th April 2010 – 125 years (important is date of document)- not
need to be expressly in the document / s7 Wait and See/s8 Class Reduction
- PAA 1964 - Prior to 2010 date – up to 80 years – have to be expressly stated in
document and if not then reliant on common law
- Common law – life in being plus 21 years
- Royal lives – instead a B being life in being, refer back to descendants of George V
being last survivor of them plus 21 years
- Vested (interest is certain even if it occurs at some point in the future) v Contingent
interests (gives no rights unless or until some future event happens – even will be
either inside or outside of perpetuity period)
- Accumulation – pre 2010 (s13 PAA 1964 – broadly 21 years from a point in time,
must be in perpetuity period or void/ can be partially valid and partially void- to
residuary or partial intestacy or result back to settlor if in lifetime) and post
2010 (s13 PAA 2009 – unlimited up to 125 years)
4. Module 4 – Fixed Interest Trust:
- Life interests (Interest in Possession) – A for life then to B - LT has right to the
income during lifetime, or event or fixed period, when period ends i.e death or
satisfaction of condition then assets revert to remainderman – advance capital to
remainderman under s32 TA 1925 but note s8 ITPA 2014 for post 2014 documents
(in Will – QIIP/lifetime – RPR), appointments are overriding powers either to benefit
LT or B but need to look at terms of trust and partition (Saunders v Vautier 1841 -
where all Bs are entitled to whole trust property between themselves i.e LT and
