creation of trusts chapter.pptx - PART A Introduction to...

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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.
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HOWEVER , no definition is entirely satisfactory.


Quare: Who are the settlor, trustees and the
beneficiary?
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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?
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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.

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PART B: - Classification of Trusts
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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.
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Not express trust
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There are namely constructive trust and resulting trust.
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What is a constructive trust?
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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?