Þ    Legal ownership of the property contained within a trust lies with the trust itself and vests in the trustees, since a trust is not a legal entity itself.

Þ    the legal ownership is vested in one person or group of persons (the Trustees)

Þ    The trustee administers the trust in the same way as a director runs a company.

Þ    They are generally granted all the powers necessary to deal with trust assets, including powers to invest (and the power to invest is also a duty), transfer, sell, divide or dispose of the property.

Þ     “trustees” (who hold the legal ownership) who are responsible for looking after the trust property

Þ     Beneficial ownership of the property contained within a trust lies with the beneficiaries, and is equitable in nature.

Þ     The beneficiaries have rights, under the trust, to the trust property.

Þ     However, they do not have the ability to enforce the legal rights associated with the property in their personal capacities – the legal rights form part of legal ownership, which is vested in the trustee.

Þ     However, beneficial ownership gives rise to the right of the beneficiaries to protect their interests by suing the trustee in equity to compel them to comply with their duties and obligations, remedy a breach of trust or recover property and/or adequate compensation when trust property has been improperly dealt with by a trustee.

Þ     the beneficial,ownership is vested in another person or persons (the beneficiaries) or (cestuis que trust).

Þ     The trustee is always bound in the trust relationship only to exercise his powers in ways that are to the benefit of the beneficiaries, and owes duties of utmost good faith and loyalty towards the beneficiaries and in dealing with trust assets. This is known as a fiduciary duty.

Þ    “beneficiaries” (who hold the beneficial ownership).

Þ    beneficial ownership can be transferred into legal ownership

This only applies where all possible beneficiaries agree and they must all be sui juris (i.e. over 18 and of sound mind).

Þ     The legal owners’, or trustees’, obligations are more extensive than ordinary contractual obligations.

Þ     The trustee is under a fiduciary obligation to act in the beneficiaries’ interests, in preference to their own interests. This may mean that the trustee has to act in a way that is contrary to their own interest or to their sense of morality.

Þ     The settlor has a wide discretion when creating the trust, subject to some limitations imposed by law.

·         Natural persons (individuals)

·         Legal entities (such as a company).

·         A person is not just limited to a UK citizen – foreign nationals, relatives or companies (trust corporations) may all be trustees.

Note: The appointment of a minor as a trustee is void under section 20 of the Law of Property Act 1925.

Þ     A trust may have more than one trustee.

Þ     A trust will not fail if no trustee has been named in the trust document.

Þ     Trustees are usually appointed in the trust document, but a court may also appoint, replace, or remove a trustee.

·         natural person (usually) – include (unborn children, minor, or someone with a mental disability.

·         a company or

·         Charity.

Þ     Administer the affairs of the trust in accordance with the trust instrument and law.

The trust’s affairs may include investing assets; ensuring trust property is preserved and productive for the beneficiaries; accounting for and reporting to the beneficiaries concerning trust property transactions; taking care of tax requirements for the trust and other duties.

Þ     They have the power to decide when and whether beneficiaries should receive trust assets for their benefit, which assets are concerned and how much they should receive.

–          a trust document will state specifically that trustees are entitled to reasonable payment for their work, which is permitted under law.

Beneficiaries have a duty to ensure that the trust is administered properly and to act in the best interests of the trust and its beneficiaries. If a beneficiary breaches any of their responsibilities, they may be liable for any resulting losses or damages suffered by the trust or other beneficiaries.

1-     Express; A trust is an express trust where the settlor has expressed his intention to form a trust. Although there is no requirement to use any particular form of words, the intention must be clear (hence the term ‘express’).

The most common example is where the settlor – the owner of the property – transfers property with a declaration, whether written or oral, that the transferee (i.e. trustee) is to hold the property on trust for the benefit of the named beneficiaries.

Legal title must also be transferred properly to trustees before the trust can be effective – the manner and form of this transfer depends on the type of property in question.

2-      Implied: Implied trusts are less common these days but arise from inferred intention of a settlor by their conduct, language or relationships that they wished to create a trust, even if they did not explicitly state as much.

3-     resulting;  Resulting trusts are implied by the court – they are not created intentionally by the settlor

where the settlor has transferred title to a trustee but failed to identify the beneficiaries, in which case the trust fails, and the beneficial interest will be held by the trustee on resulting trust for the settlor who becomes entitled to the trust assets.

A resulting trust may also arise where someone contributes to the purchase price of a property, in circumstances which do not suggest gifting, where a resulting trust will be implied in proportion to the size of the contribution.

4-     Constructive: A constructive trust is a trust implied by law, when the circumstances are such that the conscience of the legal owner should be engaged. This may be, for example, where money is paid by mistake: the person who has the money will hold it on trust for the person who paid it.

Constructive trusts arise where a defendant has acted in a way that is unconscionable and has received or kept property as a result, such that, from the time the act is performed and the person is aware that there is a mistake or dishonesty, the defendant is considered to hold the property on trust, which gives rise to an equitable interest in the property for the rightful owner. Constructive trusts can also arise in the context of family homes.

1-     Fixed beneficiary:

A fixed beneficiary has a fixed entitlement to income and capital and owns an equitable interest in the property held under the trust. In most cases, the beneficiary is a spouse, partner or child of the settlor.

2-     Discretionary beneficiary:

A discretionary beneficiary is named in a trust and to whom distributions may be made. They can request money from the trustee, but are not guaranteed to receive the same, as the trustee ultimately decides on the distribution of funds and respective entitlements. A discretionary beneficiary’s rights are dependent upon the exercise of the trustees’ powers conferred by the trust instrument.

3-     Vested interest of a beneficiary:

A vested interest of a beneficiary is an interest that already has or will eventually transfer to the beneficiary. If transfer occurs after the death of the beneficiary, the interest will pass to the beneficiary’s personal representatives. The future event must be certain to happen – for example, the death of another person, but accuracy as to timing is not required.

4-     contingent beneficiary:

A contingent beneficiary is a person or entity who is entitled to receive a property under the terms of a will, trust or insurance policy, if a certain event occurs. Unlike a vested interest, the contingent event is not certain to occur.

The maxim “equity will not assist a volunteer”

Charitable Trust & Non-charitable Trust 

Charitable trusts are public, allowing all members of a section of the public who benefit from the purposes of the trust to have an interest.

Þ    Charitable purposes may be more abstract and broad than ordinary express trusts, yet the trust will still be valid, is because the charitable trust will be regulated and overseen by the Charity Commission.

Þ    The objects of a trust can be far wider and more abstract than an ordinary trust.

Þ    Whereas an abstract purpose such as “alleviating poverty in Manchester” might be valid

This does not permit a charity from having no objects whatsoever, however. “To relieve poverty amongst my relatives” is charitable  this is a class  to benefit from the purpose to relieve poverty

Þ    A charitable trust, once properly constituted, cannot be dissolved subject to either an action of the court or provision with the trust instrument.

Þ    An abstract purpose such as “alleviating poverty in Manchester” might normally be considered a purpose trust and void.

Þ    “To relieve the poverty suffered by my son and daughter” is not charitable , this is aimed at particular named individuals so is essentially a private trust

Note: The trust should be contrasted with charitable trusts for the protection of animals or a class of animals in general.

Trusts established for the maintenance of specific animals are held to be valid non-charitable purpose trusts.

Þ     charitable trust is a purpose trust ,they are not trusts for ascertainable beneficiaries, but rather they are trusts for broad brush purposes

Þ     So, charitable trusts then present a direct challenge to the beneficiary principle

Note: Like all forms of express trusts, charitable trusts require the three certainties as well as the formalities to constitute a valid trust that must be complied with subject to whether they are made in a will, inter vivos or convey land.

Þ    identification of  beneficiary is must

Þ    The court held that for a non-charitable purpose trust to be valid, the beneficiaries of the trust must be identifiable

There are two exceptions to the beneficiary principle,

–  charitable trusts which do not require ascertainable beneficiaries;

–  Non-charitable purpose trusts with limited scope (subject to the perpetuity rule); they can be enforced by the Attorney-General.

1.       the trustees of a charitable trust are far freer to act than other trustees; and

2.       beneficiaries cannot bring a court case against the trustees.

3.       the beneficiaries are represented by the Attorney-General for England and Wales, as a parens patriae who appears on the part of the Crown.

Note: Trustees need to act by majority

Note: Trustees need to act by unanimity

Þ    Charitable trusts are exempt from ‘the rule against inalienability’ (Chamberlayne v Brockett (1872)) i.e. a charitable trust, in principle, endures forever

Þ    Charitable trusts are subject to ‘the rule against remoteness of vesting’ (Perpetuities and Accumulations Act 2009, s.5)

Þ    So this means that the charity’s interest in the property in question must vest in the charity within the perpetuity period i.e. property must vest within 125yrs

–  The new rule applies to trusts established after 6 April 2010 and derives from the Perpetuities and Accumulations Act 2009, and this states that the property must vest within 125 years. If a trust’s interests last longer than its relevant perpetuity period, then the trust is invalid. There is, however, nothing to prevent a trust from specifying a perpetuity period which is less than the maximum allowable.

–  Since non-charitable purpose trusts lack a certain beneficiary, there would also be no measure by which to apply the rule against perpetuities, causing uncertainty. The Act also provides for accumulation of income for trustees of a private trust for the life of the trust, rather than just 21 years.

Þ    Any funds that remain on the failure of a charitable trust are applied to a similar/analogous charitable purpose so they do not revert back to the settlor.

Þ    Funds which are applied “cy-près” are directed by the court or Charity Commission to a charitable purpose analogous (i.e. similar) to the original, failed, charitable purpose.

Þ    The doctrine can apply before and during the commencement of trust. Generally, impossibility at the outset means the trust will follow the same rule as the impossibility of an express private trust, and fail, creating a resulting trust in favour of the settlor. However, where a trust is impossible to perform but a general charitable intention can be ascertained, the cy-près doctrine will be applied (Biscoe v Jackson (1887) 35 Ch. D. 460) and the settlor’s relatives will be unable to inherit the money.

–  the cy-près doctrine will not apply.

–    On the failure of a private trust any funds that remain will revert back to the settlor on a resulting trust.