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Trusts | Formation

Equity & Trusts: Overview

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Equity & Trusts: Overview

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Legal and equitable interest

  • split ownership of trust property: trustee (T) legal title / beneficiary (B) equitable interest
  • B proprietary interest / trust property / if T wrongly transfers legal title to X / B enforce trust against X (if not bona fide purchaser without notice of trust) / if T dies personal representatives bound / if T bankrupt creditors no claim trust property

Fixed trusts

  • trust terms define each B's share trust property / may be conditional
  • successive trust: A (life tenant) for life remainder to B (remainderman) / A trust income during lifetime / on A's death Ts transfer property B (trust ends)
  • bare trust: T hold for sole adult B / full mental capacity / B dictate handling of trust property

Discretionary trusts

  • amounts B receives at Ts' discretion / no equitable interests until Ts exercise discretion in B's favour / flexible & allow for future changes settlor (S) cannot predict

Purpose trusts

  • benefit purpose rather individuals / most void offend beneficiary principle / exception: charitable Charities Act 2011

Nature of interests

  • vested: B exists / no conditions before entitled to trust property
  • contingent: conditional upon future event / or B not in existence / once satisfied vested / if fails: S can make provision substitutional gift / or resulting trust implied
  • B absolutely entitled: B's interest: vested / in possession / not limited / B can end trust (Saunders v Vautier)
bits of law

Equity & Trusts: Overview

[Flash Card 2 of 2]

Collective ownership

  • occupational pensions / collective investment trusts: must recognise contractual nature contributory schemes (Air Jamaica v Charlton)
  • Pensions Act 1995: restraints on who Ts (sufficient representation of employees) / Ts must obtain [professional advice / employers restricted right to surplus / public enforcement: Pensions Ombudsman & Pensions Regulator / Pension Protection Fund compensates B due insolvency or fraud
  • unit trusts: collective investment schemes / investors diversify investments / management company acts Ts / investor allocated units to represent their share of equitable interest
  • members' clubs (Ts) often hold property on behalf of members (Bs)


  • trusts can provide protection against insolvency / B equitable interest in trust property can bring proprietary claim / above creditors (Re Kayford)

Express trusts: Lifetime trusts & Wills

  • S declares self T: declaration define terms (Bs / nature of benefits / trust property & T powers) / can be oral (except land)
  • S transfers property T: valid declaration of trust & correct transfer procedure (depending on asset type)
  • if valid trust: S only recover property if reserved power of revocation
  • S (testator or testatrix) / create testamentary trust in will / trust terms must be declared & comply with validity rules

Implied trusts

  • resulting trust: gap occurs in beneficial interest / conditional trust not fulfilled then resulting trust for S implied
  • constructive trust: if unconscionable / legal owner property / deny an equitable interest
bits of law

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