PART A:- Introduction to Trust What is a ‘trust’? It is where the absolute owner of the property (the settlor) passes the legal title in that property to the person (the trustee) to hold the property on trust for the benefit of another person (the beneficiary) in accordance with terms set out by the settlor. These 3 capabilities form the ‘magic triangle’. In simple words, a trust is a device in which rights, either personal (eg: a right to be repaid by borrower) or proprietary (eg: a lease of land) are held by one person on behalf of another. HOWEVER , no definition is entirely satisfactory.
Quare: Who are the settlor, trustees and the beneficiary? Settlor is a person who holds absolute title in the property before the creation of a trust. If the settlor did not hold the absolute title in the property rights, then the settlor is incapable of creating a valid trust. On creation of a trust, the legal title in the trust property MUST BE vested in the trustee and held by the trustee on trust for the beneficiaries. HOWEVER , the important feature is that the trustee is not entitled to assert personal, beneficial ownership in the trust property. It is the beneficiary who has all the beneficial title in the property. The beneficiaries carry with him/her the equitable title or interest. They always have a right to compel the trustees to carry out the terms of the trust.
Why create a trust? The person to whom rights might want to be given could be incapable of managing them. Trust provides flexibility. For instance, by the use of discretionary trust, funds can be released to those members of a class of potential beneficiaries who have the greatest needs or sometimes-lowest liabilities to tax.
PART B: - Classification of Trusts There are several kinds of trust; however, trust is classified into 2 main areas namely, express trusts and not express trusts. Quare: - What is an ‘express trust’ and ‘not express trust’? An ‘express trust’ is one, which is intentionally created by the holder of rights ie: the settlor. It arises where a settlor makes a declaration that certain property is to be held upon trust for certain persons. A ‘not express trust’ arises as a result of failure of an express trust or even lack of intention from the part of the settlor. For instance, the operation of constructive trust and resulting trust. Not express trust There are namely constructive trust and resulting trust. What is a constructive trust? It arises by operation of law and therefore imposed by the court where the conduct of a party makes it unjust for him to retain whole or part of the beneficial interest of the property. What is a resulting trust?
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- Fall '16
- Law, beneficiary, Wills and trusts, Trust law, Discretionary trust