Express trust
Encyclopedia
Where property is passed from an owner to a person an implied express trust, but no gift is made by the owner to that person, it is therefore held for the owner by the person, and this is the Resulting trust
; where property should for some reason of public policy or rule of Equity be held by a person for someone other than the legal owner, this is either the Statutory trust or the Constructive trust
; but where legal title to property is held by someone 'on trust', this is the Express trust.
" (for jurisdictions that do not recognise Deeds) may be used. Where property is to continue to be held by the person making the trust, a "declaration of trust" will be appropriate.
Often, a trust corporation or more than one trustee are appointed to allow for uninterrupted administration of the trust in the event of a trustee's resignation, death, bankruptcy or incapacity. Additionally a Protector
may be appointed who, for example, is authorized to appoint new trustees and to review the trustees' annual accounts.
To be valid at common law, a trust instrument must ascertain its beneficiaries, as well as the res, or subject matter of the trust, unless it is a charitable trust which does not provide specific beneficiaries.
: property transferred to another to hold e.g. for a third person absolutely. May be of use where property is to be held and invested on behalf of a minor child or mentally incapacitated person.
Life Interest trust: the income from property transferred is paid to one person "the life tenant" (e.g. a widow/er) during their lifetime and thereafter is transferred to another person (who may take absolutely or a second life interest according to the terms of the trust, in the second case a third beneficiary would come into play). The trustees may have power to pay capital as well as income to the life tenant; alternatively they may have rights to transfer ("appoint") property to other beneficiaries ahead of their entitlement.
Discretionary trust
: the trustees may pay out income to whichever of the beneficiaries they, in the reasonable exercise of their discretion, think fit. They will normally also have a power to pay out capital. They may have extensive powers, even to add new beneficiaries, but such powers may normally only be exercised bona fide in the interests of the beneficiaries as a whole.
Charitable trust
s: trusts for a purpose (as opposed to for individuals) are generally invalid at common law however charities are an exception. Persons wishing to pass money to causes not recognised as charitable
may instead make gifts to established companies or associations
or may establish trusts or trust-like structures in jurisdictions which do not restrict non-charitable purpose trusts (e.g. Jersey trusts, Danish and US foundations and Liechtenstein Anstallts).
Protective trust
s and Spendthrift trust
s: can be established to provide an income for persons who cannot be trusted with it.
The court does not have the power to consent to the variation of a trust on behalf of an ascertained individual who is sui juris.(Someone above the age of consent and of sound mind)
disadvantages of a discretionary settlement but can only be established for persons under 25 who must be entitled to income at that age. Allows the accumulation of income within the trust until 25.
Disabled Trust: Similar to an A&M trust but established for a disabled person.
Reverter to Settlor trust: A trust where, on the death of the life tenant, the property reverts to the person making the gift.
Nil Rate Band Discretionary trust: UK inheritance tax is payable at 40% on estates worth over £325,000 for the 2009-2010 tax year. If assets up to that value are placed in a discretionary trust during a person's lifetime, the trust will not be taken into account for inheritance tax if the person survives for a further 7 years. Likewise in a will, many persons leave a legacy on discretionary trusts so as to take full advantage of their nil rate band (gifts to spouses
and registered civil partners
being wholly exempt).
Resulting trust
A resulting trust is the creation of an implied trust by operation of law, as where property gets transferred to one who pays nothing for it; and then is implied to have held the property for benefit of another person. The trust property is said to "result" back to the transferor...
; where property should for some reason of public policy or rule of Equity be held by a person for someone other than the legal owner, this is either the Statutory trust or the Constructive trust
Constructive trust
A constructive trust is an equitable remedy resembling a trust imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding legal right to property which they should not possess due to unjust enrichment or interference...
; but where legal title to property is held by someone 'on trust', this is the Express trust.
Terms
Law generally requires only a simple formality to create an express trust. In certain jurisdictions, an express trust may even be established orally. Typically, a settlor would record the disposition, where real property is to be held in trust or the value of property in trust is large. Where legal title to property is being passed to a trustee, a "deed of settlement" or "Trust InstrumentTrust instrument
A trust instrument is an instrument in writing executed by a settlor used to constitute a trust...
" (for jurisdictions that do not recognise Deeds) may be used. Where property is to continue to be held by the person making the trust, a "declaration of trust" will be appropriate.
Often, a trust corporation or more than one trustee are appointed to allow for uninterrupted administration of the trust in the event of a trustee's resignation, death, bankruptcy or incapacity. Additionally a Protector
Protector (trust)
In trust law, a protector is a person appointed under the trust instrument to direct or restrain the trustees in relation to their administration of the trust....
may be appointed who, for example, is authorized to appoint new trustees and to review the trustees' annual accounts.
To be valid at common law, a trust instrument must ascertain its beneficiaries, as well as the res, or subject matter of the trust, unless it is a charitable trust which does not provide specific beneficiaries.
Common forms of express trust
Bare trustBare trust
A bare trust is a trust in which the beneficiary has a right to both income and capital and may call for both to be remitted into his own name. He is also entitled to take actual ownership and control of the trust property...
: property transferred to another to hold e.g. for a third person absolutely. May be of use where property is to be held and invested on behalf of a minor child or mentally incapacitated person.
Life Interest trust: the income from property transferred is paid to one person "the life tenant" (e.g. a widow/er) during their lifetime and thereafter is transferred to another person (who may take absolutely or a second life interest according to the terms of the trust, in the second case a third beneficiary would come into play). The trustees may have power to pay capital as well as income to the life tenant; alternatively they may have rights to transfer ("appoint") property to other beneficiaries ahead of their entitlement.
Discretionary trust
Discretionary trust
In British and Canadian law, a discretionary trust is a trust where the beneficiaries and/or their entitlements to the trust fund are not fixed, but are determined by the criteria set out in the trust instrument by the settlor. It is sometimes referred to as a family trust in Australia...
: the trustees may pay out income to whichever of the beneficiaries they, in the reasonable exercise of their discretion, think fit. They will normally also have a power to pay out capital. They may have extensive powers, even to add new beneficiaries, but such powers may normally only be exercised bona fide in the interests of the beneficiaries as a whole.
Charitable trust
Charitable trust
A charitable trust is an irrevocable trust established for charitable purposes, and is a more specific term than "charitable organization".-United States:...
s: trusts for a purpose (as opposed to for individuals) are generally invalid at common law however charities are an exception. Persons wishing to pass money to causes not recognised as charitable
Charitable organization
A charitable organization is a type of non-profit organization . It differs from other types of NPOs in that it centers on philanthropic goals A charitable organization is a type of non-profit organization (NPO). It differs from other types of NPOs in that it centers on philanthropic goals A...
may instead make gifts to established companies or associations
Voluntary association
A voluntary association or union is a group of individuals who enter into an agreement as volunteers to form a body to accomplish a purpose.Strictly speaking, in many jurisdictions no formalities are necessary to start an association...
or may establish trusts or trust-like structures in jurisdictions which do not restrict non-charitable purpose trusts (e.g. Jersey trusts, Danish and US foundations and Liechtenstein Anstallts).
Protective trust
Protective trust
The Protective Trust is a form of settlement found in England and Wales and several Commonwealth countries. It has marked similarities to asset-protection trusts found in several offshore jurisdictions and US Spendthrift trusts....
s and Spendthrift trust
Spendthrift trust
A spendthrift trust is a trust that is created for the benefit of a person that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary...
s: can be established to provide an income for persons who cannot be trusted with it.
Variation of Trusts in English Law
The Variation of Trusts Act 1958 gave the courts the power to vary trusts in the following circumstances- s1(1)(a) Any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting; or
- s1(1)(b) Any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class, as the case may be, if the said date had fallen or the said event had happened at the date of the application to the court; or
- s1(1)(c) Any person unborn; or
- s1(1)(d) Any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined.
The court does not have the power to consent to the variation of a trust on behalf of an ascertained individual who is sui juris.(Someone above the age of consent and of sound mind)
Forms of trust used by UK taxpayers
Accumulation and Maintenance trust: A variation on the discretionary trust, the A&M does not carry the Inheritance taxInheritance tax
An inheritance tax or estate tax is a levy paid by a person who inherits money or property or a tax on the estate of a person who has died...
disadvantages of a discretionary settlement but can only be established for persons under 25 who must be entitled to income at that age. Allows the accumulation of income within the trust until 25.
Disabled Trust: Similar to an A&M trust but established for a disabled person.
Reverter to Settlor trust: A trust where, on the death of the life tenant, the property reverts to the person making the gift.
Nil Rate Band Discretionary trust: UK inheritance tax is payable at 40% on estates worth over £325,000 for the 2009-2010 tax year. If assets up to that value are placed in a discretionary trust during a person's lifetime, the trust will not be taken into account for inheritance tax if the person survives for a further 7 years. Likewise in a will, many persons leave a legacy on discretionary trusts so as to take full advantage of their nil rate band (gifts to spouses
Marriage
Marriage is a social union or legal contract between people that creates kinship. It is an institution in which interpersonal relationships, usually intimate and sexual, are acknowledged in a variety of ways, depending on the culture or subculture in which it is found...
and registered civil partners
Civil union
A civil union, also referred to as a civil partnership, is a legally recognized form of partnership similar to marriage. Beginning with Denmark in 1989, civil unions under one name or another have been established by law in many developed countries in order to provide same-sex couples rights,...
being wholly exempt).