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Constitution Of Trusts Notes

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This is an extract of our Constitution Of Trusts document, which we sell as part of our Trusts and Equity Notes collection written by the top tier of Oxford students.

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Constitution of Trusts What do you have to do to set up your trust and make it work?
General rule: A trust will not be completely constituted until the relevant trust property has been vested (legal title transferred) in the intended T. It will fail and be inoperable (imperfect) if it has not been transferred by the correct legal rules unless:

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all the formal steps necessary to vest the property in the trustee have been completed, or the trustee or intended beneficiary have an equitable right to compel the settlor to carry out the remaining steps necessary to vest the trust property in the trustee (cf. lectures on formalities and the right of the beneficiary to enforce an informal trust arising by operation of law).

Justification: "Equity does not assist a volunteer" - When the person to whom the transfer is intended to be made has not given valuable consideration they are said to be a 'volunteer'. Most trusts are donative transactions (ways by which the settlor makes a gift to the B, where B has given no consideration). Once the trust is properly constitutive and operative the B can enforce the T's duties, even though they are a volunteer. But if the trust is not properly constituted and operable, the court won't generally assist the B because they will have no legally enforceable rights.
---------------------------------------------------------------------------------------------------------------------------------------------Transferring the Legal TitleMilroy v. Lord (1862); Identified three ways in which an absolute owner of property could benefit another with property:

1. Make an outright gift.

2. Settlor declares that certain property vested in him or her is henceforth to be held on trust for B (selfdeclaration).

3. S effectively transfers certain property to T and declares the trusts upon which T is to hold the property for B.

Rules for valid transfer of property:
? Land - S.52 LPA 1925; A transfer of land or an interest in land must be by deed and completed by registration at the Land Registry.
? Stocks and shares - Stock Transfer Act 1963, Companies Act 1985; For a private limited company there must be a memorandum of transfer, registration of shares. For a public limited company (plc) there must be compliance with the electronic CREST system and then the correct instruction will be adequate.
? Chose in action - Includes things such as cheques, debts, or rights under a contract. Requires compliance with s.136 LPA 1925, which requires endorsement.
? Chattels - Can be transferred by deed or compliance with Re Cole [1964]; delivery and intention that legal ownership is transferred.
? Money - Merely requires delivery. Transferring the Equitable Title S.53(1)(c) LPA 1925; must be signed by the person disposing of the interest. Applies to any type of property held beneficially, not just land.
---------------------------------------------------------------------------------------------------------------------------------------------Methods of Constituting a Trust

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