This essay has been submitted by a law student. This is not an example of the work written by our professional essay writers.
Published: Fri, 02 Feb 2018
The creation and enforcement of trusts
The creation and enforcement of trusts has occurred historically, its earliest form can be traced back to the 13th century. During this period trusts began to operate under the law of equity. Equity developed as an alternative system to alleviate the unfairness that arose through the application of common law. Equity is concerned with fairness and justice and has provided equitable remedies not available under common law. The equitable nature of trusts does not allow for a legal claim since they are outside the scope of contract law. The trustee is regarded as the legal owner because they have entered into a contract. Equity developed as a separate branch in response to the injustices potential litigants would face. Today equity and common law still remain separate although they are procedurally fused as they operate alongside each other in the courts. This essay will define what a trust is and identify the purposes that they serve.
2) A trust is not simply defined as there are different types of trust. The word trust is an umbrella term since there are different types of trust distinguished by their different features.
For example trusts may be of a private or public nature. A private trust involves named persons whom the rust is intended t benefit. This type of trust is usually between family members such as a trust set up by parents to benefit their children……. Public trusts are created for a particular purpose in order to benefit society.
Nevertheless there is a common theme that is evident across all trusts. Lord Chief Justice Coke in his writings from the sixteenth century has defined a trust as a ‘confidence reposed in some other’ Following from this a trust simply put is a device by which property is held by a person (subject to certain terms) for the benefit of another. In order to further explain the meaning of trust it is useful to identify the persons involved in the creation and exercise of a trust.
3) The settlor creates a trust out of self declaration which expresses them as the creator of a trust. The self-declaration may be in written form or a conscious act that implies the settlor as the original rights holder. The settlor intends for these rights to be transferred and will reach a settlement to allow for these rights to be passed on. A settlor may also act as a trustee. The trustee is regarded as the legal owner because he or she holds the legal title by paper. Therefore the trustee holds the right to hold and manage the trust property. The beneficiary holds an equitable title because as the non-owner they hold different rights.
4) On creation of the trust the settlor imposes an obligation upon the trustee to distribute these rights accordingly for the benefit of a third party. The obligation may be made either orally or in writing and is recognised by law. The trustee has a duty to act appropriately by holding the property and exercising power for the benefit of the beneficiary and in a way that does not breach the terms of a trust. This duty is imposed on the trustee under the Trustee Act 2000
The trustee also has fiduciary duties which concern the appropriate allocation of funds. Under this duty a trustee must ensure that he or she does not profit monetarily from the trust.
Equitable maxims are relevant here as they are guiding principles emphasising the importance of fairness and justice in the execution of trusts. One of these being ‘equity regards as done what ought to be done’ this is illustrated by the case of….. In this case the court provided a remedy for……. It is shown that equity and the law have a harmonious relationship……….
The beneficiary is so called because they will ultimately benefit since trusts are created with the intention for rights to be passed to them in the foreseeable future.
These rights come in the form of trust property which may be either tangible or intangible. Meaning the trust property need not be real as one might reasonably expect to be as it is common for trust property to be money or an estate in land. Intangible property held on trust is illustrated by the case of ………….
The terms of a trust are enforceable at common law in compliance with the aims of equity to provide justice. In the case of trusts the settlor has certain intentions that must be respected and carried out in a way that they would have wanted. Since it is common for the transfer of rights to occur after the death of the settlor (testamentary) but may also occur during the lifetime of a settlor (inter-vivos). Under irrevocability once a trust is created it cannot be altered by the trustee.
Although there are many different types of trust they can be broken down into two main categories. First express trusts which arise frequently and involve the settlor declaring the intention for the creation of the trust. An example of this type of trust is…….. There are a number of requirements that an express trust must fulfil in order to be valid. The most important being the intention to create the trust,, certainty of subject matter and certainty of objects.
Secondly implied/imputed trusts which include the sub-categories of constructive and resulting trusts. An implied trust differs from an express trust because the intention is inferred to exist. There are situations that arise where the trust fails and the court will therefore ensure that the interest is transferred back to the settlor. Constructive……
The principal applications of a trust refer to the reasons for their creation and can be identified as follows:
A trust serves as a great purpose in the case of incompetent beneficiaries as it enables those who are incapable of holding and managing property to still enjoy a benefit from the trust property. This often occurs in cases where the beneficiary is not at an age of responsiblitiy.
To avoid the trust property being used in an improper way it is sensible for it to be held until the beneficiary is capable of managing the property to avoid the’improvident spendthrift beneficiaries’. In the case of property….
Another reason for the creation of a trust is that it allows for the division of interest amongst multiple persons. This is desirable as a great number of trusts involve the split of property amongst a number of family members and even over generations.
Following on from the above purpose trusts are capable of being changed to suit different situations that may occur in the future. For instance a ………
Trusts allow for
collective investment- save money pool to create large sum that can be invested in more
The courts will approach the interpretation of a trust instrument by examining the wording contained in the will in order to establish whether the trust is enforceable. This essay will determine whether a valid trust has been created by finding whether it meets the necessary criteria and applying the relevant case law.
The will in question is an example of a discretionary trust that is the trust property is distributed at the discretion of the trustee. The trustee will choose how to allocate the trust property between the members within the class. The settlor will specify the trust property and the class and the trustee must distribute the property ‘in the manner best calculated to give effect to the settlor’s intention’.. A discretionary trust allows the property to be distributed unevenly for example £200,000 to be
The courts will apply the legal test of the three certainties this is in order to give effect to the settlor’s intention. The application of this test allows the court to establish whether a trust is capable of being enforced. If the wording within a trust is vague it may prove difficult to determine the settlor’s intentions. For example if a settlor specifies that he or she wishes to leave property to their only son it is clear what they intend……………
Under certainty of intention it must be found that the settlor intended to create a trust. This requires that the words used indicate an intention to create the trust. No formal words are required for the creation of a trust as ‘equity looks to intent rather than the form’. This is illustrated by the case of Paul v Constance where it was held than although an account was held that an Mrs Paul was entitled to the money in an account in the sole name of Mr Constance as his words of “The money is as much yours as mine” were enough to suggest intention. It is not necessary for the word trust to be used although in this case it has been. The wording used in this case ‘It is my wish..’ are precatory as they are an expression of desire. The use of such words do not necessarily infer intention as illustrated by the case Mussoorie Bank v Raynor where the words ‘feeling confident’ did not create a trust. However more modern cases have taken into account the entire wording within a trust to cases which at first may appear to lack intention because of precatory words. The present case is similar to Gibbs v Harding where the words ‘it is my wish’ were followed by ‘to hold in trust’. Lewison J came to this conclusion by referring to the dictum of a previous case
It is likely the courts will take a similar approach respect of the words ‘it is my wish’ followed by ‘to be held on trust by my trustees’.
Under the certainty of subject matter it is required that the trust property be clearly identified and so the settlor must be specific in their wording. For example ‘the bulk of my residuary estate’ was held to be too uncertain. In determining certainty of subject matter the courts will base their decision with the maxim ‘that which is not certain is capable of being rendered certain’. In this will ‘all my property’ appears to satisfy this test as the word ‘all’ gives a definite quantifiable amount. However ‘property’ may be held as uncertain because this could be wide-ranging. There is a possibility that the courts will find that ‘property’ is capable of being rendered certain if can be reasonably ascertained. Also under this requirement it is must be certain how the trust property is to distributed amongst the beneficiaries. This requirement is met as the will states ‘to be allocated at their discretion’.
The third requirement is certainty of objects where the trust must have identifiable beneficiaries. In the case of a discretionary trust the ‘is or is not test’ is applied in favour over the complete list test. It must be said with certainty whether an individual is or is not a member of the class. Discretionary trusts allow for property to be distributed amongst a large number of beneficiaries and there is difficulty in finding who to exclude.
In this case the intended beneficiaries are ‘members of the black community of London’. The court will consider who will satisfy the requirement of being a member of the black community. The issue here is how it will be determined who is black and who is not. As in the case of Gibbs v Harding it may be an issue to decide whether those of mixed heritage would be included. It is likely the courts will reach a similar decision as shown by the following quote: ‘However, in my judgment Mr Henderson was right in saying that the class of inhabitants of a specified area need not be identified with the same degree of certainty as the beneficiaries of a private trust’.
Conceptual certainty requires precise identification of the beneficiaries in order for the trust to be valid. A semantic approach is taken as the courts will look at the wording within a provision. It must be established who exactly will fall within the specified class. In Re Barlow’s Will Trusts the words ‘old friends’ were conceptually certain because it would prove difficult to find who would satisfy the requirements of being old and a friend. In this case ‘members of the Black community’ is a conceptually certain provision since it will refer to those of Black ethnicity.
The settlor has specified the area as London and this location can be determined the issue that arises here is whether the inhabitants of London would be too wide a class. In the case of Mcphail v Doulton Lord Wilberforce stated that a trust created for ‘all the residents of Greater London’ would be void because it is administratively unworkable. However in Gibbs v Harding it was held that ‘The Black Community of Hackney, Haringey, Islington and Tower Hamlets’ was enforceable. It is likely that the same decision will be reached in this case although in this case the trust covers a wider area and so a larger class. In the case of R v District Auditor Ex p. West Yorkshire Metropolitan County Council it was held that a class of 2.5 million was too large. In this case it can be estimated that the black community of London is considerably less than the 2.5 million in the above case. Therefore it will be administratively workable.
The issue of capriciousness is applicable and as stated by Lloyd L.J. will arise when there seems to be no reason why the settlor would intend to benefit the beneficiaries. In this case the identity of the settlor is not stated or why they would want to benefit the Black community of London. However it can be presumed that there is a connection between the settlor and the beneficiaries as seen in the case of Gibbs v Harding.
It is likely that the court will hold that this is a valid trust.
Cite This Essay
To export a reference to this article please select a referencing style below: