Trusts and Certainty of Intention

Long Lasting Power Of Attorney - Trusts and Certainty of Intention

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This report looks at the requirements and formalities for a valid trust. In Uk law, a trust is an arrangement spirited three classes of people; a Settlor, Trustees and Beneficiaries. The Settlor is the man who transfers property to the Trust. The Trustees are population who legally own the Trust property and administer it for the Beneficiaries. The Trustees' powers are thought about by law and may be defined by a trust agreement. The Beneficiaries are the population for whose benefit the trust property is held, and may receive income or capital from the Trust.

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Long Lasting Power Of Attorney

"No singular form of expression is necessary for the creation of a trust, if on the whole it can be gathered that a trust was intended". This statement gives the impression that no formalities are needed, and could be misleading. Although equity ordinarily does look to intent rather than form, mere intention in the mind of the property owner is not enough. For a valid trust to exist, the Settlor must have the capacity to originate a trust. He must validly replacement the trust property to a third party trustee or declare himself trustee. Further, he must intend to originate a trust, and must define the trust property and beneficiaries clearly. This is known as the 'three certainties'; certainty of branch matter, certainty of objects and certainty of intention.

Certainty of intention refers to a specific intention by a man to originate a trust arrangement whereby Trustees (which may contain himself) hold property, not for their own benefit but for the benefit of another person.

It is clear when trusts are created in writing and on the advice of legal professionals that intention is present [Re Steele's Will Trusts 1948]. However, no singular form of words is needed for the creation of a trust and here the equitable maxim, "Equity looks to intent rather than form", applies. It is therefore sometimes necessary for the Courts to seek the words used by the owner of the Property, and what obligations if any the Owner intended to levy upon those receiving the Property.

It is not necessary that the Owner expressly calls the arrangement a trust, or declares himself a trustee. He must however by his escort demonstrate this intention, and use words which are to the same succeed [Richards v Delbridge 1874]. For example, in Paul v Constance 1977, Mr Constance did not expressly declare a trust for himself and his wife, but he did assure his wife that the money was "as much yours as mine". Additionally, their joint bingo winnings were paid into the inventory and withdrawals were regarded as their joint money. The Court therefore found from Mr Constance's words and escort that he intended a trust.

Certainty of intention is also known as certainty of words, although it has been suggested a trust may be inferred just from conduct. Looking at Re Kayford 1975 1All Er 604, Megarry J says of certainty of words, "the quiz, is either in substance a adequate intention to originate a trust has been manifested". In this case, Kayford Ltd deposited customer's money into a detach bank inventory and this was held to be a "useful" indication of an intention to originate a trust, although not conclusive. There was held to be a trust on the basis of conversations in the middle of the Company's managing director, accountant and boss so words were necessary for the conclusion.

In contrast, where the word 'trust' is expressly used, this is not conclusive evidence of the existence of a Trust - the arrangement may in fact constitute something very dissimilar [Stamp Duties Comr (Queensland) v Jolliffe (1920)]. For example, the deed may contain wording such as "On trust, with power to appoint my nephews in such shares as my Trustee, Wilfred, shall in his absolute discretion decide, and in default of appointment, to my friend George". Although professing to be a trust, Wilfred is not under an compulsion to appoint the nephews and provision is made for the property to pass to George if he does not. This is therefore a power of appointment, not a trust [eg. Re Leek (deceased) Darwen v Leek and Others [1968] 1 All Er 793].

Sometimes in a will, the owner of property will use 'precatory' words such as expressing a 'wish, hope, trust or desire' that the receiver of property will handle it a unavoidable way. For example, in Re Adams and Kensington Vestry 1884, a husband gave all of his property to his wife, "in full trust that she will do what is right as to the disposal thereof in the middle of my children...". The Court held that the wife may have been under a moral compulsion to treat the property a unavoidable way but this was not adequate to originate a binding trust. Precatory words can still sometimes originate a trust. In Comiskey v Bowring-Hanbury 1905, the words 'in full confidence' were again used, but the will also included additional clauses, which were interpreted to originate a trust. The Court will look at the whole of the document to ascertain the testator's intention, rather than dismissing the trust because of private clauses.

There are additional formalities required for unavoidable types of trust property, and for a trust to be valid, title to the trust property must vest in the Trustees, or, the trust must be "constituted". This might be done for example, by delivery for chattels or by deed for land. If the trust is not properly constituted, the supposed beneficiaries have no right to compel the Settlor to properly replacement the Property, as 'equity will not help a volunteer'. The irregularity to this is where the beneficiary has in case,granted observation (including marriage) for the Settlor's promise, in which case, there would be a valid compact and the Beneficiary could sue for breach.

Where a testamentary trust of land or personalty is purported, the will in which it is contained must be in writing and executed in accordance with Section 9 of the Wills Act 1837, which means the Will must be signed by the Testator in the joint nearnessy of two witnesses, and then signed by the two witnesses in the nearnessy of the Testator.

Where a Settlor wishes to originate an inter vivos trust of personalty, the formalities are minimal. Besides the usual requirements for a trust (capacity, the three certainties e.t.c), the Settlor must seek any formalities required to properly replacement the property to the trustees - for example, the carrying out and delivery of a stock replacement form for shares.

To originate an inter vivos trust of land or of an equitable interest in land, in increasing to the formalities of transferring the land, the announcement of trust must be in writing and must be signed by the man able to originate the trust - i.e., the Settlor or his attorney [S.53(1)(b) Law property Act 1925]. Where this formality is not complied, the Trustee would hold the land on trust for the Settlor rather than the Beneficiary. The irregularity is where the rule in Strong v Bird 1874 applies - the Settlor intended to make an immediate unconditional replacement to the Trustees, the intention to do this was unchanged until the Settlor's death, and at least one of the Trustees is the Settlor's administrator or executor. In this case, as the property is automatically vested in the Settlor's personal representatives and the trust is constituted.

It is sometimes stated that no singular form of expression is necessary to originate a trust if intention was present. Clearly this is not the case. There are formalities for creating inter vivos land trusts and testamentary trusts and if these are not followed, the trust will fail unless observation has been in case,granted or the rule in Strong v Bird 1874 applies, even if the Trustee had the best intentions. Further, the form of words used in those formalities must be clear and unambiguous, or they may not whole to a trust. He goes on to say that 'a trust may be created without using the word "trust"' and this is true in that other words and escort to that succeed are sufficient. However, the Court does not just regard the 'substance' of the words. If the wording used does not meet the 'three certainties' or, for example, the man manufacture the announcement does not have the capacity to make a trust, the trust will fail. This is clearly not the desired 'effect' and not the owner's intention.

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