An express private trust requires three certainties
- Certainty of intention = the settlor intends to create a trust
- Certainty of subject matter = the trust property is certain
- Certainty of objects = the beneficiaries are ascertainable
The settlor must ensure that all three certainties are present for a valid trust
Basics of trusts law
- all non-charitable trusts are private trusts
- an express trust is intentionally created by the settlor
- the creation of a trust can be inter vivos or testamentary
- when dealing with a will, the settlor is referred to as the testator
- the settlor can act as trustee or they can appoint others to act as trustees
- the trust must also have beneficiaries
Private trust
Is any trust that is not charitable. The trust is said to be an express trust when the settlor intentionally created it
Settlor
The person creating the trust
Inter vivos
During the lifetime of the settlor
Ways a settlor can create a trust
- In writing, either formally by executing a trust instrument or in a will; or by letter or a written note.
- by words or conduct
It is a question of construction whether or not a trust has been created. The court will look at the words in the document (if written) or the words and conduct of the settlor (if not in writing) when deciding whether a valid trust has been created.
Testamentary
A testamentary creation of trust is a trust created in a will
Testator
The person who created the will
Trustees
The trustees hold the legal title of the trust assets and are under a duty to administer the assets for the benefit of the beneficiaries
Beneficiaries
The beneficiaries are entitled to benefit from the trust and they hold the equitable title to the trust assets.
The beneficiaries are said to have the beneficial interests.
Certainty of intention
It must be clear that the settlor, by their words or conduct, had the intention to create this trust.
There is no set form of words to use, so as long as it is clear that the settlor intended to create a trust.
The use of precatory words
Precatory words = words expressing confidence, wish, belief, desire, hope or recommendation.
The use of precatory words is unlikely to result in the creation of a trust - unless it is clear from the whole context of the document that the testator intended to create a trust.
Gift over in default of appointment
Where a settlor has created a trust which gives the trustee a discretion on distribution of the trust property, the settlor may sometimes include an alternative gift in the event of a failure to distribute the property.
The use of the word ‘trust’
Inclusion of the word ‘trust’ may not necessarily create a trust if there was no genuine intention on the part of the settlor to do so.
Informal words and actions
A written document is incessant so long as the settlor shows sufficient intention to create a trust.
Informal words are acceptable if the intention to create a trust is clear; there is no need to use the word ‘trust’.
The courts are unlikely to construe lose conversations as an intent to create a trust.
In an SQE question - don’t just consider the settlor’s words and actions but also all the other relevant information included in the question.
The settlor’s conduct
Can conduct alone be used as evidence of an intention to create a trust?
In Re Kayford - court held that a separate account was evidence of intention to create a trust.
Certainty of intention: Overview
- The settlor must intend to create a trust
- Precatory words are generally insufficient. Question of construction looking at the whole context.
- The use of the word ‘trust’ is not definitive if lacking genuine intention.
- No need to use the word ‘trust’; informal words and actions are acceptable.
- The settlor’s conduct alone may show intention.
Certainty of subject matter
A trust must have assets - the trust property or the subject matter
The property subject to the trust must be described with sufficient certainty, otherwise the trust fails.
The subject matter of a trust includes both the property subject to the trust and the beneficial entitlement of each beneficiary. The entitlement of each beneficiary must be certain.
Palmer vs Simmonds case - use of the word ‘bulk’ meant that the subject matter was insufficiently certain.
Residuary estate
The residue is everything that is left in a deceased’s estate after all debts and taxes have been paid and all specific and non-specific gifts have been distributed.
Certainty of property without certainty of beneficial interest
The trust fails if there is uncertainty of beneficial interest.
Important to note that the property subject to the trust and the beneficial interests may not always be the same. Always start by identifying the trust property, then identify how much each beneficiary is entitled to.
Objective assessment by the court
- Where appropriate, the court can save the trust if they are able to objectively assess a beneficiary’s entitlement.
- It is common practice for a settlor to leave property on trust for their child with a direction that the child is to receive a reasonable income from the property. The property subject to the trust is certain assuming it has been clearly identified. The issue is whether there is certainty of beneficial interest.
- In Re Golay’s Trust case - the court was willing to accept the words ‘reasonable income’ as being sufficiently certain as they can make a objective assessment of the amount the beneficiary should receive based on the circumstances of the case.
Tangible vs intangible assets
- There is a different degree of certainty required depending on the type of asset.
Tangible assets = physical property or chattels
Intangible assets = non-physical property such as shares, patents, etc. Includes cryptocurrencies and NFTs.
Tangible assets
If a settlor created a trust of only one part of their assets, there is no certainty of subject matter unless the tangible assets are clearly identified, usually by segregating them from the larger stock.
Intangible assets
Provided the assets are similar, there is no need for segregation.
