Structures for Equity and Trusts :
Settlor -> Person who creates the trust. They decide who will be involved in the
trust and what its terms should be.
Trustee -> Person holding the property for the benefit of another. Has legal
ownership of the property.
Beneficiary -> Person whom the property is being held for. Has equitable
interest in the trust property.
Type of trusts :
Express trust : any trust which the settlor expressly wanted to create.
(Wanted property to be held by one person for the benefit of another)
Within express trusts :
- Fixed trusts : Fix from the outset who the beneficiaries are to be and
what share they are going to get.
- Discretionary trusts : Trust does not stipulate what each beneficiary’s
entitled to. This is left to the discretion of the trustees (they have
discretion how to allocate the trust fund).
Creation of express trusts :
Settlor must :
- Make valid declaration of trust :
1. Intention to create a trust, subject matter and objects Knight v Knight
1840
Intention ?
Subject ?
Object ?
2. Comply with beneficiary principle
Trust must have ascertainable human beneficiaries.
3. Satisfy the rules against perpetuity
- 125 years for contingent interests and discretionary trusts.
- For non charitable purpose trusts : void if the trust capital is not freely
alienable within the relevant perpetuity period.
4. Complete any formalities for express declarations of trust.
Personalty = declaration can be oral.
Land = evidenced in writing but need not be a deed or other formal
document.
, - Ensure that the property is properly vested in the trustees.
A. Settlor transfers the trust property to the trustees and makes a valid
declaration of trust imposing the trust obligation on the trustees to hold
on trust for the beneficiary ; OR
B. Settlor declares himself trustee for the beneficiary by making a valid
declaration of trust. = Constitution is automatic as settlor already
holds legal title to the trust property.
For A =
1. Settlor must comply with necessary formalities to transfer the trust
property to the trustees (see formalities).
2. Equity will only enforce an incompletely constituted trust in favour of a
beneficiary who has given value.
3. Incompletely constituted trusts will not be construed as declarations of
trust by the settlor declaring himself trustee.
4. Incompletely constituted trusts are unenforceable by volunteer
beneficiaries but exceptions :
Every effort test Milroy v Lord
Settlor intended an immediate trust and it has reached a point where it
would be unconscionable for the settlor to revoke the trust Pennington
v Wayne
Strong v Bird 4 conditions:
Donor dies and donee is appointed the donors executor or administrator.
Donor intends to make an immediate gift to the donnee but it is invalid because
he fails to comply with the appropriate formality for transferring legal title to
the relevant property.
Intention must be to make immediate gift NOT one which is conditional on an
event in the future.
Intention must continue unchanged until the donors death.
Transfers formalities :
Land
S.52(1) Law of Property Act 1925 = Transferor must execute a deed.
Deed must satisfy Law of Property (Miscellaneous Provisions) Act 1989 :
- Document is stated to be a deed or is stated to be signed as a deed ;and
, - Person making deed signs doc in presence of a witness who also signs it.
For registered land :
- Deed is in From TR1 issued by Land registery (LR)
Deed has to be sent to LR.
Legal title transferred when registration complete.
Shares
1. Shares outside CREST system (example : Ltd)
- Transferor signs form of transfer, s.1 Stock Transfer Act 1963
- Form sent to company with existing share certificate
- New shareholder is registered in register of members and legal title
passes to him when registered.
2. Shares within the CREST system
- CREST computerised share transfer system (recorded electronically)
- No need to sign a stock transfer form.
Chattels (Jewellery, furniture etc)
- Physical delivery of assets to the transferee ; or
- By deed.
Transfers of title when the donor owns an equitable interest
- Trust already in existence but beneficiary wants to give or sell his
interest
- S.53(1)(c) Law of Property Act 1925
- Transfer by writing signed by the person disposing of it or by his agent or
by will
Grey v IRC : if ‘holding’ = required in writing
Vandervell v IRC : when equitable interest is transferred along with the
legal title = not required in writing.
Gifts
Donor transfers to donee who has management and enjoyment of the property.
- Donor must have necessary mental capacity to make a gift
Understand nature of transaction and consequences.
RE Beaney 1978 : higher degree sometimes necessary.
- Donor must have the intention manifested by words or conduct to make a
gift
Settlor -> Person who creates the trust. They decide who will be involved in the
trust and what its terms should be.
Trustee -> Person holding the property for the benefit of another. Has legal
ownership of the property.
Beneficiary -> Person whom the property is being held for. Has equitable
interest in the trust property.
Type of trusts :
Express trust : any trust which the settlor expressly wanted to create.
(Wanted property to be held by one person for the benefit of another)
Within express trusts :
- Fixed trusts : Fix from the outset who the beneficiaries are to be and
what share they are going to get.
- Discretionary trusts : Trust does not stipulate what each beneficiary’s
entitled to. This is left to the discretion of the trustees (they have
discretion how to allocate the trust fund).
Creation of express trusts :
Settlor must :
- Make valid declaration of trust :
1. Intention to create a trust, subject matter and objects Knight v Knight
1840
Intention ?
Subject ?
Object ?
2. Comply with beneficiary principle
Trust must have ascertainable human beneficiaries.
3. Satisfy the rules against perpetuity
- 125 years for contingent interests and discretionary trusts.
- For non charitable purpose trusts : void if the trust capital is not freely
alienable within the relevant perpetuity period.
4. Complete any formalities for express declarations of trust.
Personalty = declaration can be oral.
Land = evidenced in writing but need not be a deed or other formal
document.
, - Ensure that the property is properly vested in the trustees.
A. Settlor transfers the trust property to the trustees and makes a valid
declaration of trust imposing the trust obligation on the trustees to hold
on trust for the beneficiary ; OR
B. Settlor declares himself trustee for the beneficiary by making a valid
declaration of trust. = Constitution is automatic as settlor already
holds legal title to the trust property.
For A =
1. Settlor must comply with necessary formalities to transfer the trust
property to the trustees (see formalities).
2. Equity will only enforce an incompletely constituted trust in favour of a
beneficiary who has given value.
3. Incompletely constituted trusts will not be construed as declarations of
trust by the settlor declaring himself trustee.
4. Incompletely constituted trusts are unenforceable by volunteer
beneficiaries but exceptions :
Every effort test Milroy v Lord
Settlor intended an immediate trust and it has reached a point where it
would be unconscionable for the settlor to revoke the trust Pennington
v Wayne
Strong v Bird 4 conditions:
Donor dies and donee is appointed the donors executor or administrator.
Donor intends to make an immediate gift to the donnee but it is invalid because
he fails to comply with the appropriate formality for transferring legal title to
the relevant property.
Intention must be to make immediate gift NOT one which is conditional on an
event in the future.
Intention must continue unchanged until the donors death.
Transfers formalities :
Land
S.52(1) Law of Property Act 1925 = Transferor must execute a deed.
Deed must satisfy Law of Property (Miscellaneous Provisions) Act 1989 :
- Document is stated to be a deed or is stated to be signed as a deed ;and
, - Person making deed signs doc in presence of a witness who also signs it.
For registered land :
- Deed is in From TR1 issued by Land registery (LR)
Deed has to be sent to LR.
Legal title transferred when registration complete.
Shares
1. Shares outside CREST system (example : Ltd)
- Transferor signs form of transfer, s.1 Stock Transfer Act 1963
- Form sent to company with existing share certificate
- New shareholder is registered in register of members and legal title
passes to him when registered.
2. Shares within the CREST system
- CREST computerised share transfer system (recorded electronically)
- No need to sign a stock transfer form.
Chattels (Jewellery, furniture etc)
- Physical delivery of assets to the transferee ; or
- By deed.
Transfers of title when the donor owns an equitable interest
- Trust already in existence but beneficiary wants to give or sell his
interest
- S.53(1)(c) Law of Property Act 1925
- Transfer by writing signed by the person disposing of it or by his agent or
by will
Grey v IRC : if ‘holding’ = required in writing
Vandervell v IRC : when equitable interest is transferred along with the
legal title = not required in writing.
Gifts
Donor transfers to donee who has management and enjoyment of the property.
- Donor must have necessary mental capacity to make a gift
Understand nature of transaction and consequences.
RE Beaney 1978 : higher degree sometimes necessary.
- Donor must have the intention manifested by words or conduct to make a
gift
