Formalities of a Trust

• Valid declaration of trust creates a new interest.

• Disposition of beneficial interest transfers an existing interest.

• Three types of trust:

  • Inter-vivos trust

  • Testamentary Trust

  • Trust of Land

• Inter-vivos trusts:

  • May be declared informally (orally or by conduct)

  • Recall Paul v Constance [1977] - Cash in the bank account was used for bingo winnings of Claimant and her deceased partner. These had been shared. Conduct sufficient for trust.

  • Must comply with Trusts of Land requirements.

• Trusts created by will/testamentary trusts.

  • Must be contained within a valid will (if the will is invalid all clauses are too).

  • S.9 of the Wills Act 1837 (as amended by the Administration of Justice Act 1982)

    • Will must be in writing

    • Will must be signed by the testator

    • Will must be attested by two witnesses (in the presence of the testator but not necessarily in the presence of each other).

      • Attest does not mean signed. May just write name (Payne v Payne)

      • Lack of independence does not invalidate whole will, only invalidates the clauses relating to the non-independent person.

  • Any amendments to the will must be made by declaring a new will or a codicil.

• Trusts of Land

  • s.53(1)b of the Law of Property Act 1925 requires all trusts of land be evidenced in writing.

    • s.1 TOLATA: a trust of land is any trust which consists of or includes land.

    • Non-compliance with s53(1)(b) will render the declaration of trust unenforceable, rather than void.

      • This requirement is ad probationem not ad validate: writing is necessary for evidence purposes but not to validate the declaration of trust.

      • This means it is possible to declare the trust orally but later provide evidence of that declaration in signed writing.

  • The requirement is often ignored as equity will not allow a statute to be used as an instrument of fraud.

    • Rochefoucald v Bousted [1897] – land transferred to D on understanding it was on trust for Countess do Rouchefoucald, never written down.

      • Held that to deny the existence of the trust would amount to a fraud on the Comtesse. The trust could be evidenced by oral evidence.

    • Bannister v Bannister [1948] – Mrs Bannister inherited two cottages from husband. Transferred to brother-in-law for undervalue on oral agreement she would live there rent-free for life.

      • Trust enforced to prevent fraud from brother in law.

• Disposition of a Subsisting Equitable Interest

  • When a beneficiary under a trust is attempting to do something with their equitable interest (nb not legal interest).

  • Timpson’s Executors v Yardley [2002] four valid methods of disposing of equitable interest:

    • 1) Assigning property/interest to a third party directly

    • 2) Directing the trustees to hold the property on trust for a third party.

    • 2) Contracting for valuable consideration (i.e. sell it)

    • 4) Declare a sub-trust of equitable interest with themselves as trustee.

  • S.53 (1)(c) LPA 1925 applies to any trust regardless of the type of property:

    • Requires a disposition be in writing, signed by disposer or an authorised agent.

    • Non-compliance will make disposition void.

    • This only relates to intention transfers, not resulting, implied or constructive trusts. (S.53(2) LPA)

  • A disposition is an act by which a person intends to cease their beneficial ownership of a property.

• 1) Assigning property/interest to a third party directly

  • s. 53(1)(c) applies.

• 2) Directing the trustees to...

Buy the full version of these notes or essay plans and more in our GDL Equity and Trusts Notes.