#3117 - Intro To Trusts - GDL Equity and Trusts

- Split ownership in trust: legal + equitable.

• legal ownership: trustees – responsibilities but no beneficial enjoyment of trust property.

• equitable/beneficial ownership: beneficiaries – right to beneficial enjoyment.

• 2 interests may be dealt with separately.

- Use of trusts: extremely flexible – can be designed to meet a variety of circumstances.

• examples: gift to minor; maintenance of incapable person; income to one person for life (e.g. widow) while ensuring capital goes to another (e.g. children); tying up gift so beneficiary cannot waste it; ensuring gift cannot be claimed by beneficiary’s creditors; postponing a gift; discretionary trust: trustees can split among class according to circumstances.

• express private trusts: deliberately created by settlor – normally used for protection/preservation of wealth.

• charities: form of public trust – normally exist to promote a purpose rather than specific people.

• implied trusts: resulting + constructive trusts – imposed by law in certain circumstances; no intention necessary.

- Classification of trusts

• express trusts: usually deliberately set up by settlor (but: can be deduced from conduct).

  • private: for benefit of private individuals.

  • charitable: for public purposes, not private individuals.

• implied trusts: implied by law, sometimes despite settlor’s intentions.

  • resulting: property ‘results’/returns to settlor (e.g. because not fully disposed of, or because retained beneficial interest).

  • constructive: imposed by law in some cases to remedy fault or facilitate transaction (e.g. contracts, esp. for sale/purchase of land).

  • statutory: implied by statue (e.g. intestacy: statutory trusts arise under Administration of Estates Act 1925, amended by Trusts of Land and Appointment of Trustees Act 1996).

• bare trust: beneficiary absolutely entitled to trust property Saunders v Vautier rights: can dissolve trust + have trust property transferred to them.

- Saunders v Vautier [1841] rule: assimilates equitable + legal ownership.

• right to dissolve trust: beneficiaries of bare trust given same rights as absolute legal owners – because they really ‘own’ the property.

  • based on principle in wills: sole legatee of vested interest could demand immediate payment even if testator had stipulated executor should accumulate interest first.

• development: application to multiple beneficiaries + discretionary trusts in some circs.

  • multiple beneficiaries: Curtis v Luken [1842] – if sui juris + in agreement.

  • discretionary trust:

    • Re Smith [1928]: beneficiaries together absolutely beneficially entitled.

    • Gartside v IRC [1968] and Sainsbury v IRC [1970]: beneficial interest of discretionary beneficiaries in suspense until selected by trustees.

    • large no. of beneficiaries: may not work – difficult to reach agreement.

• powers: S v V does not apply – objects of powers have no rights to property.

- Private trusts: 3 main types relevant.

• 1. fixed trusts: settlor determines in trust deed the beneficial interest of each beneficiary.

  • e.g. “to TI and T1 on trust for A for life remainder to B absolutely”

  • successive interests possible: life tenant – interest for life, only entitled to income; remainderman – benefit when life tenant dies, entitled to capital.

  • vested vs. contingent interests:

    • vested: unconditional

      • ‘vested in possession’: right to present enjoyment; or

      • ‘vested in interest’: present right to future enjoyment.

    • contingent: subject to condition which may or may not be met.

• 2. discretionary trusts (or ‘trust powers’): trustees given discretion, usually over (a) whether to pay income out and (b) to whom; usually within a class. flexible: provision for beneficiaries according to future needs.

  • e.g. “to T1 and T2 on trust for such of my nephews and nieces as they in their absolute discretion shall select”.

  • exhaustive vs. non-exhaustive:

    • exhaustive: trustees obliged to pay out all income per year.

    • non-exhaustive: trustees have additional discretion over whether to accumulate or pay out income.

• 3. protective trusts: S. 33 Trustee Act 1925 applies when property left ‘on protective trusts’ designed to protect trust fund + ‘principal beneficiary’.

  • e.g. “for A for life on protective trusts, remainder for B, C and D equally”

  • at first: life interest for ‘principal beneficiary’ – BUT: automatically ends if bankrupt, or if attempts to assign interest discretionary trust takes over for rest of beneficiary’s life (s33: ‘the trust period’).

  • discretionary trust: formed if life interest ended beneficiaries: principal beneficiary, spouse + children + remoter issue (or: if no spouse or issue – principal beneficiary + those entitled if p.b. were dead, i.e. remaindermen).

- Rights and duties under a trust:

• settlor: no ongoing duties unless also a trustee.

• trustee: bound to manage property in accordance with terms of trust to advantage of beneficiaries – precise obligations vary: imposed by settlor + statute.

• beneficiaries: personal rights against trustee – to enforce terms of trust; proprietary rights to trust property – right to use + enjoy it etc.

- Powers of appointment (‘mere powers’): authority to deal with someone else’s property.

• donee/appointor has complete discretion: (a) which of class of potential beneficiaries should benefit; (b) how much of the property subject to the power should be appointed.

• personal vs. fiduciary powers: dep. on identity of appointor.

  • personal power: donee not a trustee – no obligation to exercise or consider exercising power – if does: limited to class of potential beneficiaries.

    • e.g. “I give my shares to my trustees to hold on trust for A for life and subject thereto for such of my children and remoter issue as A selects and in default of selection for my children equally.”

  • fiduciary power: donee a trustee – obligation to consider exercising it, but no obligation actually to do so – if does: limited to class of potential beneficiaries.

    • e.g. "I...