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Published: Fri, 02 Feb 2018

Execute the estate efficiently

In relation to “Mountain View” , Penny intended to give the holiday cottage as a gift to Ben Beano, this is a gift and not a trust. The formalities differ for a gift and for a trust. Law of Property Act 1925 s52 (1) states that all land must be transferred or conveyed by deed. Furthermore the person receiving the property has to be registered as the new owner ss19 & ss22 Land Registration Act. Any land transferred in accordance with these statutes becomes a “perfected gift” (Duddington, 2009, 54). It becomes clear that Ben is not registered as the proprietor of this property with Her Majesty’s Land Registry and also that the deed has not been executed making the gift “unperfected”.

There is however case law which could be considered to allow an im-perfected to gift to qualify. Milroy v Lord (1862) has exemplified three methods which could perfect an im-perfect gift. Pennington v Waine and Re Rose (deceased) laid down the principles which could be considered in Ben Beano’s case. The principle of unconsiousability laid down in Pennington v Waine offers the strongest principle for Ben Beano. This principle refers to where the intended recipient of a gift relied and altered their position on the basis of receiving this gift (Ramjohn, 2006, 20). Evidently, Ben has altered his situation by possessing the keys to the cottage, attending to the cottage and informing people that he will continue to attend the cottage with his family, but the courts may not be so lenient as to say this suffices enough to change the position and allow the gift to pass. One may also argue that Penny has satisfied the “every effort” test seen in Re Rose (deceased), and this would be an area lacking enough references, a judicial grey are needing clarification because Penny could undeniably have done a lot more to ensure that the cottage was legally transferred to Ben (Ramjohn, 2009, 17). Law of Property (Miscellaneous Provisions) Act 1989 provides that a deed has to signed and witnessed and in this case, the deed has been signed and witnessed.

The gift could succeed because of the above reasoning but if the Courts believed Penny’s actions to be inadequate then the gift would fail and the property would be held on the resulting trust back into the estate.

Penny also gave away Penny Products Ltd. The three certainties are relevant when considering Penny Products Ltd because this is a trust and not a gift. As consolidated in Knight v Knight, these are the three certainties: certainty of intention, certainty of subject-matter and certainty of objects. These three certainties need to be vested for the trust to be fully constituted. “The three certainties need to be present so that the trust can be practicable, enforceable and capable of supervision by the court” (Haley & McMurty, 2009, 201).

The trustees in this case have the discretion as to the beneficiaries and the amount to be benefited and as such Penny can be said to have created an exhaustive discretionary trust. The trust does not allow the trustees to withhold any of the trust property and to do so would not be completely exhaustive. The wording used by Penny is not in the least precautionary and she is very clear she intends to create a trust (Watt, 2007, 52). Paul v Constance (1977), the Courts can infer intention from Penny’s behaviour and conduct.

The subject matter has to be clearly identifiable and has to be segregated from all other property that does not form part of the mentioned trust. Penny satisfies this when she leaves all of her shares and not part or portion of the shares thereby negating the need for segregating the subject matter.

Finally, the beneficiaries/objects have to be clear as “every trust must have a definite object. At all times, there must be someone in whose favour the Court can decree performance” (Sir William Grant, Morice v Bishop of Durham). A discretionary uses the “is or is not” test to establish this certainty, this test allows for the functioning of the trust as long as a trustee can say with certainty that such and such persons are not beneficiaries (Hepburn, 2001, 293). This means that Tony is able to say with certainty who is or who isn’t a niece or a nephew, as there are only six mentioned.

With regards to shares, they can only be transferred by using a signed Shares Certificate. The facts of the case state that Tony and Deborah have received a Shares Certificate meaning the shares become a fully constituted trust.

Penny decides to add gold coins and her potential inheritance to the trust. The gold coins were to be placed in the same trust already established for the nieces and the nephews. Because the structure of the trust is the same, differing only on the subject matter, the three certainties can said to have been proved and satisfied. The only problem is that the gold coins are not actually in the possession of the trustees (Moffat, 2005, 169). Thomas v Times Book Co Ltd (1966) states that the delivery of the delivery of chattel is sufficient enough to constitute a trust but in this case the mentioned gold coins are in a safe deposit box meaning that the attempt to create a trust fails.

Penny’s attempt to transfer her inheritance to her nieces and nephews fails because she has not received the property as of yet and cannot covenant the inheritance into a trust fund, laid down in Re Ellenborough (Martin, 2009, 108). The inheritance mentioned by Penny was the remainder interest she stood to inherit after her mother’s death. The inheritance would not form part of the trust nor would it be part of Penny’s estate, following the above mentioned case.

So Edward is advised that the holiday cottage could succeed based on the “every effort test” in Re Rose. But if this fails the gift is more likely to be put back into the estate via a resulting trust. The trust fund of shares was successfully constructed and so the charity would have no entitlement to the shares. The gold coins unfortunately did not form part of the trust fund and so would be held on resulting trust back into the estate and passed on to the charity. Finally the inheritance that Penny would receive upon her mother’s death is not part of her estate and will not become part of her estate until her mother dies and even then only if there is something left over. The charity as a result only inherits £20,000 worth of gold coins.

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