The Three Certainties

Question 1

What is certainty of intention?

Answer 1

There must be intention to create a trust

Question 2

What is the necessary intention?

Answer 2

There must be an intention too impose or assume the duty which is characteristic of a trust, ie a duty to hold property for or apply property for the benefit of a beneficiary

Question 3

How can a person’s intention towards creating a trust be ascertained?

Answer 3

Through examining their words and conduct

Question 4

What approach do the courts take in determining whether a person intends to create a trust?

Answer 4

An objective approach to see if they have manifested an intention to impose or assume the duty which is characteristic of a trust, they intend to create a trust.

Question 5

Do the subjective intentions of the parties matter in seeing if the requisite intention is there?

Answer 5

No - parties do not even have to know a trust is a concept

Question 6

What approach is taken whether a written document amounts to intention to create a trust?

Answer 6

Intention of author’s ascertained by identifying the meaning of the words which have been used.

Meaning of words to be ascertained by:

• natural and ordinary meaning
• any relevant contextual features of the document
• facts known or assumed by the authors when document was created
• common sense

Question 7

What effect will the use of the word ‘trust’ have on deciding if there is intention to create a trust?

Answer 7

Will be a good indicator of intention to create a trust but will not be determinative - either by presence of absence

Relationship will be determined by substantive right and duties of parties not how it was characterised by the parties

Question 8

What effect will segregating/earmaking assets have on deciding if there is intention to create a trust?

Answer 8

Normally good evidence of intention to create a trust but not always conclusive evidence and not strictly necessary

Question 9

What effect will context have in deciding whether there is a trust or not?

Answer 9

The words and context must be taken into account in deciding whether there is intention to create a trust.

Question 10

What are the two requirements for there to be certainty of subject matter?

Answer 10

• the trust property requirement - it must be possible to identify the trust property
• the beneficial entitlement requirement - must be possible to ascertain the beneficiary’s interest in the trust property

Question 11

Why is it necessary for the trust property to be identified?

Answer 11

• duty to hold property for beneficiaries or to apply it for their benefit is meaningless unless it is possible to identify the property which it relates
• assertion of an equitable right is futile unless it is possible it is possible to identify the property against the right is being asserted

Question 12

What potential problem is there when identifying trust property by description?

Answer 12

If it is not possible to ascertain the trust property from description - trust will fail for uncertainty

Question 13

Will a trust over a fractional interest of a wider mass be certain?

Answer 13

Yes - will hold fractional interest in each object eg 20% of settlor’s five one carat diamonds - beneficiary has 20% share in each of them

Question 14

What is fungible?

Answer 14

Means identical and readily exchangeable

Question 15

What assets can a specified number out of a bulk create a valid trust?

Answer 15

Assets that are fungible and intangible

Question 16

What assets will a specified number out of a bulk not create a valid trust?

Answer 16

• fungible tangible assets
• non-fungible, tangible assets
• non-fungible, intangible assets

Question 17

What is the beneficial entitlement in relation to trust property?

Answer 17

It must be possible to ascertain the nature and extent of the beneficiary’s interest in that trust property

Question 18

What is certainty of objects?

Answer 18

Objects need to be certain so trust can be regulated and enforced by the court if necessary

Question 19

What can be objects of the trust?

Answer 19

• beneficiaries or
• purpose in purpose trusts

Question 20

Is certainty of objects the same for all trusts?

Answer 20

No - certainty required is greater for fixed trusts than discretionary because trustee has no flexibility - they must distribute as the settlor intended so they must know exactly who is to benefit

Question 21

What happens is there is uncertainty as to the beneficiaries of a fixed trust?

Answer 21

The trust will fail.

If multiple beneficiaries and only one identity is uncertain then trust will not necessary completely fail - other beneficiaries can still claim their interest

Question 23

What is the test for certainty of objects where there is a trust that requires equal distribution between a class?

Answer 23

Complete list test - must be possible to draw up a complete list of all the beneficiaries

Requires both

• conceptual certainty and
• evidential certainty

Question 24

What is conceptual certainty?

Answer 24

Refers to the precision of certainty used by the settlor to define the class of persons whom they intend to benefit

Question 25

What is evidential certainty?

Answer 25

Refers to extent to which the evidence in a particular case enables the trustees to identify the objects of the trust

Question 26

What test of certainty must a power of appointment satisfy in order to be valid?

Answer 26

The is/is not test

Question 27

What is the is/is not certainty test?

Answer 27

Requires a trustee to say with certainty whether 'any given individual is or is not a member of the class'

Question 28

What test of certainty of objects is required for a discretionary trust?

Answer 28

The is/is not test

Question 29

What categories of people are said to be certain enough to satisfy the is/is not test?

Answer 29

Children, employees and relatives (descendants from a common ancestor)

Question 30

What category of people is not said to be certain enough to satisfy the is/is not test?

Answer 30

Friends

Question 31

Who bears the burden of proving they fall within a class of beneficiaries for a trust?

Answer 31

The claimant. If they cannot prove that they are in the class they are considered to be outside it

Question 32

What is administrative uncertainty and what effect will it have on a discretionary trust?

Answer 32

Administrative unworkability - class of beneficiaries 'is so hopelessly wide as not to form 'anything like a class' so that the trust is administratively unworkable Any trust that is administratively unworkable will be void Eg inhabitants of Greater London

Question 33

Does the size of class for a fiduciary appointment matter for validity on basis of administrative uncertainty?

Answer 33

No - can be power to appoint property to anyone in the world and still be valid

Question 34

What is the consequence of uncertainty with lifetime trusts where there has been no transfer of legal title?

Answer 34

There will be no change of beneficial ownership unless all three certainties are satisfied

Question 35

What are the consequences of uncertainty with lifetime transfers where legal title has been transferred?

Answer 35

- if no certainty of intention presumption of resulting trust applies (can be rebutted ie making transfer a gift) - if clear intention for transferee to be trustee, automatic resulting trust arises if there is uncertainty of subject matter or objects

Question 36

What are the consequences of uncertainty with testamentary trusts?

Answer 36

- if no certainty of intention then outright gift - if uncertainty as to subject matter or objects, the trust fails and property falls into residue