SQE1 Assessment Specification Summary Notes: Trusts Law
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This is a summary document of SQE1 Specification for Trust Law.
It follows SRA's SQE Assessment Specification so you have everything you need to know in one document. Perfect for revision.
I used it to prepare for my July 2023 SQE exams, in which I scored 74% (top 20% of candidates).
Notes...
Creation and the three Trusts which arise because of a person's intention to create one
requirements certainties of
of express intention, Parties: settlor, trustee, beneficiary(ies)
trusts: subject
matter and Certainty of intention – we are looking for an intention to impose a duty to hold for the benefit of
objects: person(s). In the self-declaration – intention to assume that duty. Transfer – intention to impose that
duty on a person. Person's intention is ascertained from their behaviour – conducts, words etc. A
person can create a trust even they have no idea what a trust is – it is whether settlor wanted to
impose a duty characteristic to a trust – no need to appreciate the legal implications of his words.
- Use of precatory words (I wish/I hope) – unlikely to create a trust
- Conduct alone could show an intention
Certainty of subject matter – need to ascertain what the property is and then identify and ascertain
the entitlement of the beneficiaries. When the items are chattels, it is necessary for the settlor to
identify the chattels. If shares of the same class in the same company (abstract property), no need to
separate and identify the shares. Items with physical properties – chattels might differ a little bit.
Beneficiary has a fraction of interest when trustee holds all the shareholding. Certainty of subject
matter comprises two requirements. The second requirement is the beneficial entitlement
requirement: it must be possible to ascertain the nature and extent of the beneficiary’s interest in
the trust property.
- Reasonable income = sufficiently certain
- Boyce v Boyce – trust failed because it was not possible to ascertain which house the dead
daughter would have chosen so the 'rest of the houses' could not go to the alive daughter.
- Tangible assets must be clearly identified
- Provided intangible assets are similar = no need for segregation
Certainty of objects – two types (conceptual certainty: language & evidential uncertainty: fact)
- Fixed trusts specified individuals (ascertain ability) / equal distribution: complete list test
- Discretionary trusts and powers is/is not test (is it possible to say of any given postulant that
he is or is not a member of the class of objects) & admin unworkability
- Size of the class does not invalidate the PoA (bcos there's no obligation to exercise) (Re Beatty
– court upheld a fiduciary power to appoint property to anyone (or any corporation) in the
world)
Issues arising when assessing certainty of objects
- Conceptual uncertainty – makes trust void. Where words used to describe Bs are too vague for
the courts to apply. Friends = uncertain (unless he gives some other features which can help
determine what it means), relatives/family/dependants = certain
- Evidential uncertainty = when trustees unable to determine exactly who fits the description.
Extrinsic evidence admissible so will not automatically make trust void.
- Administrative unworkability = too big of a class
- Gifts to individuals answering a particular description: the one person test
, -
fixed interest Distribution to Bs determined by the settlor
trusts
Automatic right to payment. Proprietary interest in the trust assets
Bare trust = where trustees are holding property for the sole benefit of an adult B. B has full control
over the actions of the trustees in relation to the trust property. Trustees must comply with B's, incl.
how to invest the asset, how much to pay B or even terminating the trust and transferring the legal
title to B if so ordered.
discretionary Distribution amongst objects determine by trustees
trusts
The beneficiaries may never benefit. They cannot compel the trustees to decide in their favour. BUT:
they may be able to terminate the trust.
No automatic right to payment
formalities to Lifetime trusts – two ways: transfer on trust or self-declaration of trust
create
express inter Inter vivos trusts
vivos trusts - Trusts of personality: no formalities required. Words, conduct and intention for someone else
to benefit enough.
- Trusts of realty: LPA, Trust of land = need to use writing + sign it, possibly transfer legal title to
trustees (not if it is a testamentary trust). If originally oral, the relevant date would be the date
of the oral declaration. Unenforceable if not complied with (BUT: not void), so held on resulting
trust for the settlor.
Self-declaration = The father does not need to use writing, as this is not a new trust of land. The trust
is valid and enforceable as it is. However, it would be a good idea to have some evidence of this trust.
Three certainties + beneficiary (or permitted purpose) + compliance with applicable perpetuity rule
Additional req for testamentary – valid will = in writing + signed by testator + attested by 2
independent witnesses in the presence of testator
Inter vivos trusts – if a transfer on trust, 'constitution of the trust' or if a trust of land, compliance
with s53(1)(b) LPA
Perpetuity rule – rule against remoteness or vesting (trusts for persons) – interests must vest in
interest (not possession) within the perpetuity period of 125 years; interests which would vest
, beyond that period are void & rule against inalienability (trust must come to an end within the
common law perpetuity period i.e. period of a life in being plus 21 years – or 21 years) + possibility of
royal lives clauses (for a period equal to the longest surviving descendant of King who is living on the
date of my death, plus 21 years). Rule v vigorous in its application. There is no wait and see rule – so
settlor needs to create an express clause that talks about the perpetuity period that limits the
duration of the trust.
Disposition of an equitable interest
- Disposition is of a subsisting equitable interest (equitable interest that has already been
separated from the legal title)
- Applicable to trusts of personalty or realty
- Before the disposition, the legal and equitable ownership have already been separated
- Required to be in writing
- Void if not complied with
- Allows for a signature by an agent if given written authorisation
Four different ways of this disposition
- Assign to a third party directly (in writing and signed by the transferor, otherwise void)
- Direct the trustees to hold the property for a 3rd party (where Bs of a bare trust directed the
trustees to hold the trust property for another) – Vanderwell case what happened was the
legal and equitable title merged when trustees transferred the shares to RCS (the same shares
they held on bare trust for V). To see whether we need the same formalities = check whether
the equitable interest is moving with the legal title resulting in them two merging (this is not a
disposition so no need for formalities) If remains separate = formalities
- Contract for valuable consideration to assign the equitable interest = disposition so formalities
(most important Q: whether the equitable interest moved from one person to another, if yes –
disposition void unless formalities met)
- Declare oneself a trustee of such an interest // creating a sub-trust if sub-trust was not a
genuine trust, it must comply with formalities. Genuine trust when adult B retains his equitable
interest and holds on trust for his child who has a sub-interest. Then formalities not required.
Other means of 'disposing' of equitable interest when no need for formalities
- When equitable interest disclaimed
- Nominations under a pension fund
Constitution
of express Constitution – only applies to the transfer of the intended SM from the settlor to the trustee. It
inter vivos ensures that the trust is completely constituted by vesting the trust property in the trustees.
trusts and - Transfer on trust must be 'constituted' by the transfer of the trust assets to the trustee
exceptions to - Final element: the settlor must VEST the property in trustees. Once vested = trust is completely
the rule that constituted and binding on the settlor
equity will - If the settlor is the trustee himself – the property is already vested in him (no constitution rules
not assist a necessary)
volunteer. - A gift requires the donor to transfer the SM of the gift to the donee
- General rule: imperfect gifts and imperfectly constituted trusts will have no effect
Beneficiaries who have not provided consideration for the trust = volunteers
- Equity will not perfect and imperfect gift
- Equity will not assist a volunteer = a volunteer who was the recipient of an incomplete gift or B
of an incompletely constituted trust will not receive assistance from the court to obtain the
property
Requirements for constituting trusts
- Regged fee simple estate – LPA/LRA sections (trusts of land must be evidenced in signed
writing – in the absence of evidence, trust unenforceable). Merely endorsing a leasehold
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