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What is a trust?

A trust is a legal arrangement used to protect assets, such as land, buildings or money for the benefit of the “beneficiaries” to the trust.

How do trusts arise?

Trusts can be created either expressly (an “express trust”) or by implication (an “implied trust”). Generally they are created expressly. An express trust will arise when a “settlor” (the person whose assets are placed into trust) expressly creates a trust.

How are express trusts commonly created?

Express trusts are commonly created in wills or in a legal document known as “deed of trust” (sometimes called a “trust deed” or a “trust instrument”).

What are the requirements of a valid express trust?

For an express trust to be valid a number of requirements must be fulfilled. These are as follows:

“Certainty of intention”

For an express trust to be valid the settlor must have intended to create the trust. It is not essential to use the word “trust”, although if the word “trust” is used it will normally be presumed that the settlor intended to create the trust.

“Certainty of subject matter”

Essentially the assets affected by the trust, such as land, buildings or money (commonly referred to as “trust property”) must be either expressly defined or referred to in a manner which would enable such assets to be ascertained. Any property a settlor may acquire at a later date will not form part of the trust property unless a further trust is created.

“Certainty of objects”

The beneficiaries of the trust must be either expressly stated or referred to in a manner which would enable such beneficiaries to be ascertained, unless the trust is created purely for charitable purposes.

The beneficiaries will be certain if, for example, their names are stated or if they are described as the settlor’s “grandchildren” for instance. A description such as the settlor’s “friends” will not be sufficient as it would not be possible to say with certainty who is a friend of the settlor and who is not.

A trust will be void if it is “administratively unworkable”. For example, if a settlor were to describe the beneficiaries as “everyone in the world” such a trust would be administratively unworkable and, therefore, void.

Compliance with any “statutory formalities”

Sometimes acts of parliament set out formalities which must be adhered to for something to be valid. These are known as “statutory formalities”. For example, where a trust relates to land or an interest in land the trust will only be valid if there is a written declaration of trust signed by the settlor. This requirement will normally be met when a trust is created by a will of deed of trust.