Two Ways Of Creating A Trust
A trust is simply a legal body which allows holding of property.With a few exceptions, a trust may be created by any person who owns certain property. A trust may be created either during ones’ lifetime, also known as ‘Inter Vivo (IV)’, or after death by will. There are two ways of creating a trust, by transfer in shares and by declaration. On one hand, the settlor may opt to transfer property to a trustee who is meant to hold the property on behalf of the beneficiary. The obligations of the trustee are provided in the Trust deed between the settlor and the trustee. Often, the trustee has the legal obligation to hold the property on behalf of the beneficiary. This means that although the trustee is the legal owner of the property, he is not
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allowed to use that property to their disposal. On the other hand, the settlor may hold his property on trust for a beneficiary by declaring himself the trustee.
In the first scenario, it involves a transfer in trust inter vivo, where Charles (whilst still alive) conveys property to Giles for holding on behalf of the Bethany. Transfer of an inter vivo trust is equal to a creation of a trust by will. In order to advice on Bethany’s Trust, the existence of a trust must be established on the basis of capacity and certainty.Any person who owns a certain property has the capacity to create a trust of it. Charles was a wealthy man and therefore had the capacity to create trusts. In this situation, an inter vivo trust was created by Charles when he verbally declared Giles as the trustee to an original Jack Vettriano painting and an Aston Martin. These items were to be held on trust for Bethany.These constituted express trusts (ET), which is a trust intentionally created and declared by the settlor. According toKnight v Knight, Certainty of intention (CI), Certainty of subject matter (CS) and Certainty of objects (CO) make up three certainties required to create a valid trust.
With regard to certainty of intention (CI), it must be established that the settlor wishes were expressed in a clear and imperative manner, to make it clear to the trustee that they are only required to hold the property for the beneficiary. This is emphasized in the Adams v. Vestry case where the court held that in creation of trusts, words must be free of confusion and clearly state the purpose of the trust. In the current situation, Charles has made it clear that Giles is to hold the shares on trust for the Beneficiary, Bethany. His words to Giles make it clear that he wishes him to take care of the property for Bethany, forming a certainty of intention (CI).With regard to Certainty of subject matter (CS), Charles clearly identifies the painting and the Aston Martin as the items he wishes to put under trust, providingCertainty of subject matter (CS). With regard to Certainty of objects (CO), there must be clear identification of the beneficiary of the trust to allow for a fixed trust, where the interest of the trust is known from the start.In this situation, Bethany is ascertained to be the Beneficiary, creating sufficient Certainty of objects (CO).
Having established the existence of a trust, the provisions of section 53(1)of the Law of Property Act 1925 may apply. The act provides that trusts must be put in writing and authorized by the settlor. Although the validity of a trust does not depend on this formality, it is important for purposes of property transfer. There is no evidence of such formalities in this situation, although Charles gives Giles all the authentic paperwork and receipts for the objects. In this scenario, there is evidence of sufficient capacity and certainties, providing enough grounds to retain the credibility of Bethany’s trust.
Had Charles declared himself the trustee to Bethany’s trust, he would have had the benefit of using the property on trust as opposed to an appointed trustee who cannot use the trust as they wish. It is also possible that Charles would have declared Giles as the next trustee who would step up to the position in the event of his death.
b). Georges share transfer
In advising on George’s shares at ‘Continental Camping Ltd’,issues of imperfect gifting and creation of power must be addressed. The law governing shares is found in s.183 of the companies’ act of 1985.The law simply provides that for transfer of shares to occur, a share transfer form must be filled and submitted. In this situation, Charles informed George of his decision to transfer his shares. He also filled out the stock transfer form in respect of the transfer of the shares to George, thus formally constituting the transfer. According to Milroy v. Lord and the sole intention to transfer shares without the formalities to constitute the transfer results in an incomplete transfer. As such, Charles filled in the stock transfer form and share certificate, which he later handed to Oliver for processing. Charles therefore gave Oliver the power to transfer shares to George.
An appointment of power occurs when a donor imparts upon someone else the power to handle property which is not theirs. This person becomes the donee. The donor is then not allowed to exercise such power as appointed to the donee. As such, Charles did not follow up on the share transfer after handing the documents over to Oliver. The shares were however never transferred to George. According to the Milroy v Lord case of 1862, evidence of efforts to transfer the shares, may allow for complete transfer on grounds of equity.
In establishing the every effort test, Re Rose also holds that a gift transfer will be considered complete if the donor has completed all required formalities to transfer the said gift.In this situation,Charles exhibited efforts to transfer the property by filling the stock transfer form and by further submitting this form along with ashare certificate for approval, therefore creating enough grounds for complete transfer of the shares.
c). Local Charity
With regard to giving Swithland House to a local charity, it is upon the discretion of the court to decide whether Charles has done everything within his power to transfer the property. The first issue is to establish whether the deed qualifies as a charitable trust. The applicable law would be s.52 of the Law of Property Act 1925 which requires that the transfer of property be put down it writing and authorized by the donor.
A donor may give beneficial interest of property to another person in three main ways. First, The property may be transferred directly as a gift. Second, the property may be transferred to a trustee in trust for the beneficiary and third, a donor may declare himself the trustee. In this scenario, Charles opts to transfer the property as a gift to a local charity but fails to transfer the property before his
death.
The Strong v Bird rule provides three conditions to assist in cases of incomplete gifting. First, there must have been intent by the donor to give the gift in his lifetime. Second, this intention must have been upheld by the donor until his demise. Finally, there must be an appointed done to act as administrator of the will. The situation passes the first criterion but fails the second and third criteria. The donors intent inter vivo must be evidenced by the donors intent, and a delivery of an instrument or subject matter to the gift. In this case, Charles obtained a deed of conveyance for the transfer, which he kept in his safe until his death. The intention to uphold this intent until his demise is evidenced by the fact that Charles kept the deed of conveyance hidden in his safe. There is no evidence of an appointed done to administrate the will.
Prior to his death, Charles seems to have made little or no effort to complete the transfer.Although there is a declaration of the property, there is no specific declaration of the beneficiary, nor a stated purpose of the charity, thus making it difficult to transfer the property. The transfer therefore fails to meet the certainty criterion. At this juncture, it would be upon the discretion of the court award the property to the local charity, but that cannot be guaranteed because no specific Charity has been identified. In a similar case of Chichester Diocesan Fund v Simpson (1944), the donor requested the executor to apply his trust to charitable courses of their choice. According to the executors, this formed a valid charitable gift, (Malik, 2008). They therefore allocated the funds to many different charities. The court, however, felt that the gifts were void because there were no specified beneficiaries. In this scenario, there is insufficient evidence of effort to complete the transfer as well as failure of certainties. However, a trust purposed for causes beneficial to society is deemed charitable. It is therefore upon the court to determine whether the purpose of the intended charity warrants the completion of the transfer.Despite the charitable nature of a gift, the court may revoke the transfer of a charitable gift if the gift is allocated to a small class of people.The court may also revoke laws that seek to bring change to existing law. In the event where property transfer to a charity cause is incomplete, the court may treat the transfer as the will of the donor, thus effecting his intentions.
allowed to use that property to their disposal. On the other hand, the settlor may hold his property on trust for a beneficiary by declaring himself the trustee.
In the first scenario, it involves a transfer in trust inter vivo, where Charles (whilst still alive) conveys property to Giles for holding on behalf of the Bethany. Transfer of an inter vivo trust is equal to a creation of a trust by will. In order to advice on Bethany’s Trust, the existence of a trust must be established on the basis of capacity and certainty.Any person who owns a certain property has the capacity to create a trust of it. Charles was a wealthy man and therefore had the capacity to create trusts. In this situation, an inter vivo trust was created by Charles when he verbally declared Giles as the trustee to an original Jack Vettriano painting and an Aston Martin. These items were to be held on trust for Bethany.These constituted express trusts (ET), which is a trust intentionally created and declared by the settlor. According toKnight v Knight, Certainty of intention (CI), Certainty of subject matter (CS) and Certainty of objects (CO) make up three certainties required to create a valid trust.
With regard to certainty of intention (CI), it must be established that the settlor wishes were expressed in a clear and imperative manner, to make it clear to the trustee that they are only required to hold the property for the beneficiary. This is emphasized in the Adams v. Vestry case where the court held that in creation of trusts, words must be free of confusion and clearly state the purpose of the trust. In the current situation, Charles has made it clear that Giles is to hold the shares on trust for the Beneficiary, Bethany. His words to Giles make it clear that he wishes him to take care of the property for Bethany, forming a certainty of intention (CI).With regard to Certainty of subject matter (CS), Charles clearly identifies the painting and the Aston Martin as the items he wishes to put under trust, providingCertainty of subject matter (CS). With regard to Certainty of objects (CO), there must be clear identification of the beneficiary of the trust to allow for a fixed trust, where the interest of the trust is known from the start.In this situation, Bethany is ascertained to be the Beneficiary, creating sufficient Certainty of objects (CO).
Having established the existence of a trust, the provisions of section 53(1)of the Law of Property Act 1925 may apply. The act provides that trusts must be put in writing and authorized by the settlor. Although the validity of a trust does not depend on this formality, it is important for purposes of property transfer. There is no evidence of such formalities in this situation, although Charles gives Giles all the authentic paperwork and receipts for the objects. In this scenario, there is evidence of sufficient capacity and certainties, providing enough grounds to retain the credibility of Bethany’s trust.
Had Charles declared himself the trustee to Bethany’s trust, he would have had the benefit of using the property on trust as opposed to an appointed trustee who cannot use the trust as they wish. It is also possible that Charles would have declared Giles as the next trustee who would step up to the position in the event of his death.
b). Georges share transfer
In advising on George’s shares at ‘Continental Camping Ltd’,issues of imperfect gifting and creation of power must be addressed. The law governing shares is found in s.183 of the companies’ act of 1985.The law simply provides that for transfer of shares to occur, a share transfer form must be filled and submitted. In this situation, Charles informed George of his decision to transfer his shares. He also filled out the stock transfer form in respect of the transfer of the shares to George, thus formally constituting the transfer. According to Milroy v. Lord and the sole intention to transfer shares without the formalities to constitute the transfer results in an incomplete transfer. As such, Charles filled in the stock transfer form and share certificate, which he later handed to Oliver for processing. Charles therefore gave Oliver the power to transfer shares to George.
An appointment of power occurs when a donor imparts upon someone else the power to handle property which is not theirs. This person becomes the donee. The donor is then not allowed to exercise such power as appointed to the donee. As such, Charles did not follow up on the share transfer after handing the documents over to Oliver. The shares were however never transferred to George. According to the Milroy v Lord case of 1862, evidence of efforts to transfer the shares, may allow for complete transfer on grounds of equity.
In establishing the every effort test, Re Rose also holds that a gift transfer will be considered complete if the donor has completed all required formalities to transfer the said gift.In this situation,Charles exhibited efforts to transfer the property by filling the stock transfer form and by further submitting this form along with ashare certificate for approval, therefore creating enough grounds for complete transfer of the shares.
c). Local Charity
With regard to giving Swithland House to a local charity, it is upon the discretion of the court to decide whether Charles has done everything within his power to transfer the property. The first issue is to establish whether the deed qualifies as a charitable trust. The applicable law would be s.52 of the Law of Property Act 1925 which requires that the transfer of property be put down it writing and authorized by the donor.
A donor may give beneficial interest of property to another person in three main ways. First, The property may be transferred directly as a gift. Second, the property may be transferred to a trustee in trust for the beneficiary and third, a donor may declare himself the trustee. In this scenario, Charles opts to transfer the property as a gift to a local charity but fails to transfer the property before his
death.
The Strong v Bird rule provides three conditions to assist in cases of incomplete gifting. First, there must have been intent by the donor to give the gift in his lifetime. Second, this intention must have been upheld by the donor until his demise. Finally, there must be an appointed done to act as administrator of the will. The situation passes the first criterion but fails the second and third criteria. The donors intent inter vivo must be evidenced by the donors intent, and a delivery of an instrument or subject matter to the gift. In this case, Charles obtained a deed of conveyance for the transfer, which he kept in his safe until his death. The intention to uphold this intent until his demise is evidenced by the fact that Charles kept the deed of conveyance hidden in his safe. There is no evidence of an appointed done to administrate the will.
Prior to his death, Charles seems to have made little or no effort to complete the transfer.Although there is a declaration of the property, there is no specific declaration of the beneficiary, nor a stated purpose of the charity, thus making it difficult to transfer the property. The transfer therefore fails to meet the certainty criterion. At this juncture, it would be upon the discretion of the court award the property to the local charity, but that cannot be guaranteed because no specific Charity has been identified. In a similar case of Chichester Diocesan Fund v Simpson (1944), the donor requested the executor to apply his trust to charitable courses of their choice. According to the executors, this formed a valid charitable gift, (Malik, 2008). They therefore allocated the funds to many different charities. The court, however, felt that the gifts were void because there were no specified beneficiaries. In this scenario, there is insufficient evidence of effort to complete the transfer as well as failure of certainties. However, a trust purposed for causes beneficial to society is deemed charitable. It is therefore upon the court to determine whether the purpose of the intended charity warrants the completion of the transfer.Despite the charitable nature of a gift, the court may revoke the transfer of a charitable gift if the gift is allocated to a small class of people.The court may also revoke laws that seek to bring change to existing law. In the event where property transfer to a charity cause is incomplete, the court may treat the transfer as the will of the donor, thus effecting his intentions.