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Introduction to the Trusts
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Lecture notes of 7 pages for the course Equity And Trusts at UoS (.)
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Introduction to the TrustsTrusts
A definition for ownership that splits the legal title from the equitable title.
Importance of understanding what trust is, and how it differs from other ways in
which property can be transferred from one person to another, to be managed or
given away.
If you own property, you could just choose to give it to somebody outright as
an absolute gift.
No trust would have been created, it would just be a gift.
You might want to transfer property to a person with some power, or some
authority, to deal with that property in a certain way.
This might create a power of attorney or a different type of power,
not a trust.
Definition
Underhill & Hayton – ‘A trust is an equitable obligation binding on a person to deal
with property over which he has control for the benefit of persons, called
beneficiaries, of whom he himself may be one, and any, of whom may enforce that
obligation’.
A trustee being a person, a character, within the trust who has to look after
the property for the benefit of someone else (a beneficiary).
Sheridan’s Law of Trusts – ‘A trust is the relationship which arises wherever a person
called the trustee is compelled in equity to hold property, whether real or personal
and whether by legal or equitable title, for the benefit of some persons (…who are
termed beneficiaries) or for some object permitted by law, in such a way that the
real benefit of the property accrues, not to the trustee, but to the beneficiaries or
other objects of the trusts…’
Explains the nature of a trust.
The Law of Trust is concerned with the utilisation and preservation of wealth.
How and Where Trust Can be Used
The history of the trust was born out of preserving property.
Nowadays, the wealth that we wish to preserve can be in the form of pension
funds or unit trusts or charitable funds, union funds, club funds, or private
family money.
Often property is settled on trust because it avoids or minimises the tax
liabilities, such as inheritance tax or capital gains tax.
When you create a trust, the nature of ownership of the property differs.
Legal ownership.
Equitable ownership.
The trust allows its creator (the settler) to provide funds secretly through a trust for
a lover or an illegitimate child.
Providing for an illegitimate child is not a problem nowadays.
Historically, if a child was born out of wedlock, that child would have no legal
rights.
Child would be barred from inheriting as a member of a family.
, Trust is a flexible device.
Used in Modern Times to deal with pensions, assets.
A trust can be constructed so they can be Express.
An express trust is where the legal owner of the property declares
that they hold the property on trust for specified beneficiaries.
The declaration will also set out the proportion or ways in which they
are to hold beneficial interest.
Where there is an express declaration, this will override the principles
of resulting or constructive trusts unless the declaration was obtained
by fraud or mistake.
The court can find and build a trust based on the actions of a person.
A person with legal title may find that their conscience has been
affected by equity.
Assets can be held by a trustee for the benefit of minors, who might be
regarded as being foolhardy.
The trust instrument, once created, is usually private and it remains confidential
between the trustees and the beneficiaries.
Trust can be used in place of a will.
All the assets can be transferred to a trustee by a person in her lifetime.
On the death of the settler, the trustee would be obliged to distribute the
property in the way they have promised to do, and according to the trust
instrument.
Even if the person didn’t have a will, it would still be possible to avoid
probate.
Mediaeval Practice of ‘the Use’
The use comes from the Latin ‘at opus’, which means on behalf of.
During the early medieval period that the practice first arose of owners of property
transferring that property to the use of someone else.
This other person would hold the legal title to the property, but they were
not free to do as they wished with the property – they didn’t own it outright.
The ownership had been split and divided, and the person to whom
the property had been transferred held the legal title for the use and
benefit of someone else.
Jill Martin’s example.
‘If legal title to land is given to A on A’s promise to hold the land for the use
and benefit of B – it would be unconscionable for A to keep that land for his
own benefit’.
A has the legal title, not B.
Equity can act in personam against the conscience of A.
Not everybody had a right to own property.
Women.
Religious orders, who had taken vows of poverty.
Female children.
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