Questions and Answers
What is required for a valid trust creation regarding the intention of the settlor?
Which of the following describes a fiduciary relationship in a trust?
What was the key issue in the case of Milroy v Lord (1862)?
What are the three certainties necessary for trust creation?
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What does the principle 'there is no equity in this court to perfect an imperfect gift' imply?
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What does 'certainty of subject matter' mean in the context of trust creation?
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What must a settlor do to ensure a valid voluntary settlement?
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In trust law, what is meant by 'complete constitution'?
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Study Notes
The creation of a trust, known as its constitution, requires a formal process where the legal title of the trust property is transferred from the settlor, who is the individual establishing the trust, or from a testator, who has made a will. This transfer is essential as it appoints a trustee, an individual or entity tasked with managing the trust assets on behalf of the beneficiary. This relationship embodies fiduciary duty, where the trustee must act in the best interest of the beneficiary, ensuring their equitable rights are upheld and protected throughout the trust's duration.
Key Concepts
- Importance of the three certainties in trust creation:
- Certainty of intention: clear intention to create a trust.
- Certainty of subject matter: identifiable trust property.
- Certainty of objects: identifiable beneficiaries.
- Delineation and splitting of legal and equitable title are critical in the formation of a trust.
Case Study: Milroy v Lord (1862)
- Settle transferred 50 shares to a trustee but did not register the trustee's name with the bank as required.
- Legal title was not effectively transferred, resulting in the settlor retaining both legal and equitable interests.
- The court ruled that the trust was not valid due to incomplete constitution of a trust.
Legal Requirements
- According to the corporate rules at the time, registration of the legal title holder’s name was necessary for valid title transfer of shares.
- A valid voluntary settlement requires the settlor to do everything necessary to make the settlement binding.
- The principle that “there is no equity in this court to perfect an imperfect gift” highlights the stringent requirements for effective trust creation.
Complete Constitution of a Trust
- A complete constitution is essential for a valid trust creation.
- Various forms and modes of title need to be understood to establish what constitutes complete constitution effectively.
Constitution of a Trust
- Constitution involves the trustee acquiring legal ownership of property designated for trust use.
- The transfer of legal title from the settlor or testator to the trustee is crucial, benefitting the identified beneficiary.
- A fiduciary relationship is established, where the trustee holds legal title, and the beneficiary possesses equitable rights.
Key Concepts
- Creation of a trust hinges on the three certainties:
- Certainty of intention: A definite decision to form a trust is necessary.
- Certainty of subject matter: The property involved must be clearly identifiable.
- Certainty of objects: Beneficiaries of the trust must be clearly defined.
- Clarity in the division of legal and equitable titles plays a vital role in trust formation.
Case Study: Milroy v Lord (1862)
- In this case, a settlor attempted to transfer 50 shares to a trustee without registering the trustee's name as required.
- The failure to properly register the trustee resulted in the settlor retaining both legal and equitable interests in the shares.
- The court deemed the trust invalid due to the incomplete process of constituting the trust.
Legal Requirements
- Historical corporate regulations mandated that registration of the legal title holder's name was essential for the valid transfer of shares.
- A valid voluntary settlement necessitates the settlor taking all steps necessary to ensure the settlement is enforceable.
- The maxim “there is no equity in this court to perfect an imperfect gift” underscores the rigorous standards required for establishing a valid trust.
Complete Constitution of a Trust
- Achieving a complete constitution of a trust is vital for legality.
- Understanding the various forms and modes of title is crucial for defining what constitutes a fully constituted trust effectively.
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Description
Learn about the methods and processes of creating a trust, involving the transfer of legal title from the settlor to the trustee for the benefit of a beneficiary, and the fiduciary relationship that emerges.
