The Definition of a Trust
trusts is a device in which rights (personal or proprietary) are held by one person on behalf of another some trusts are created by court. These are constructive trusts. person creating the trust: settlor
person holding rights: trustee
person for whom those rights are held: beneficiary
Lord Coke's Definition
"a confidence reposed in some other, not issuing out of land but as a thing collateral thereto, annexed in privity to the estate of the land, and to the person touching the land, for which cestui sue trust has no remedy but by subpoena in the Chancery."
Sir Arthur Underhill's Definition (in Underhill and Hayton, Law of Trusts and Trustees) "an equitable obligation binding a person (called a trustee) to deal with property (called trust property) owned by him as a separate fund, distinct from his own private property, for the benefit of persons (called beneficiaries or, in old cases, cestuis que trust) of whom he may himself be one and any one of whom may enforce the obligation."
Why create a trust?
interested recipient of rights could be incapable of managing them (ex. children) flexibility
enjoyment of rights can be split on a plane of time
Principal Uses of Trusts Today
To enable property, particularly land to be held for persons who can not hold it themselves. The legal title to land can not be vested in a minor, but it can be held on trust for one. Legislature has adopted this, providing that a purported conveyance of a legal estate in land to a minor operates as declaration that the land is held in trust for that minor. To enable persons to make provisions for dependants privately. Most obvious examples: provisions made for an illegitimate child for mistress. These provisions can be made during the persons lifetime without publicity. A will becomes a public document once probate is obtained and can then be inspected by the public. A trust created other than by will will however not be public provided the person making it either settles property on intended beneficiaries during his lifetime or creates a secret trust in his will. To tie up property to benefit persons in succession. A gift of property to trustees to hold on trust for the parent for life, and after, the children. This ensures that the person ultimately entitled at least receives any assets derived from the property. To protect family property from being wasted. A person may feel that a gift of money would be quickly spent. To make a gift in case of future circumstances that have not yet arisen and are not known yet. To minimise incidence of income tax, capital gains tax and inheritance tax. To enable two or more persons to own land.
To facilitate investment through unit trusts and investment trusts. Objective is to enable small investors to acquire a small stake in a large portfolio of investments to spread risk across a substantial range of stocks and shares. To enable companies to raise finance from investors on the security of debentures and bonds. To make provision for causes or for non-human objects. For example furtherance of education or maintaining an animal. To protect the environment.
To provide pensions for retired persons and their dependants. Courts will in certain circumstances infer the existence of a trustee- beneficiary relationship where the owner of the property has intentionally carried out some other transaction (resulting trust) or
Courts can impose a relationship of trustee and beneficiary as a result of some type of misconduct by the person who is held to be the trustee (constructive trust).
Case: Chase Manhattan v Israel- British Bank (1981) Ch 105
claimant mistakenly paid US$ 2,000,000 to defendant bank
personal liability at common law on defendant to repay wasn't useful do claimant because of subsequent insolvency of defendants. rights held by trustee on trust for others don't form part of estate available for distribution to...
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