Implied Trusts and Family Homes - Essay Example

?Implied trusts and family homes Introduction: It is very important for the sake of enforcing trusts equitably and in non partisan manner, to understand the different roles played by trusts in contemporary society, both in the spheres of private and commercial life. “In most common law systems, trust properties are those properties that are managed by one person, a group of people, or organizations for the benefit of another. A trust agreement is created when an individual enters into an agreement that stipulates that the secondary parties will be entrusted with some or all of the initiating party's property. The owner of the property most commonly is referred to as the settlor. Trustees are the individuals or individual with which the settlor initiates the agreement. The agreement typically stipulates that the trustees will manage the property in a manner that will be most beneficial to the settlor.”1 Thus the main role of trusts is to hold property in trust for somebody else and to return the properties or chattels once the settlor, or owner, demands it or the property in trust is shared in some equitable or just manner or in a manner decided by the Court or suitable land tribunal authority. The main aspect to be remembered is that the trustee is just holding the property of the settler in trust and not on ownership and thus he is accountable to the true owner of the property for all that transpires during the absence of the latter. Trusts could be both public and private. Public trusts inure for the public whereas private trusts are to control and oversee private trusts which are owned by private agencies. “Property trusts can become the legal owners of property. There are many different types of trusts that individuals can use to protect assets after death. After forming property trusts, individuals can transfer the ownership of their property into these trusts for later distribution. With this arrangement, a trustee is going to watch over the property for the creator of the trust, or the grantor. One of the primary advantages of using property trusts is that an individual can minimize estate and gift taxes. Taxes are levied on an individual's estate once it reaches a certain value. If the estate is determined to be larger than the exemption, part of the estate will be taken away in taxes. By transferring the assets into an irrevocable trust before death, the assets are removed from an individual's estate. This lowers the value of the estate and eliminates the potential for estate taxes.2 Understanding of the trust instrument in terms of what it is and how it is a creation of equity. A trust instrument is a contract or agreement of trust, between the settler/ owner and the trustee with sets forth the terms and conditional ties of the trust transaction. Persons may monitor the appropriation of their properties during their lifetime through the medium of trusts. There are many genres of trusts and objectives for their creations. This may inure for the future benefit or financial need of the trust creator, a surviving spouse or children, or even for charitable purposes. Although the law recognizes a variety of trusts, the law comes down heavily on trusts whose primary objective are to avoid taxes, creditors or legal responsibilities and could declare such trusts void and unenforceable. Again, in spite of the fact that trust laws are onerous and complicated, the basic needs for trust are just in terms of whether a trust has indeed been created, its scope and depth, its legality or otherwise, public or private trusts and whether the trustee has indeed managed the trust well and in line with the objectives of trust covenant. An oral or written trust binds the contracting parties, in as much as the property matters are concerned. All of covenant signatories would have to honour their part of the commitments in as much as the trust is concerned. If one party or group of parties infringe the terms of the trust, it is well within the jurisdiction of the remaining parties to bring action for redressal of damages and detrimental wrong doing on the part of the errant trust holder, or trustees. In other words, it is important, that like partnership wherein the aspect of Ubermae Fidie (utmost good faith) must be maintained- besides the trustee is an agent of the other joint owners and needs to uphold the highest traditional values of an agency business. Trust beneficiaries or holders need to disclose all material facts and data that impinge upon it to other co owners and joint owners of trust property. The terms of the written trust instrument or statement of settler, while creating the trust, enunciates categorical powers or responsibilities delineated by the owner of the trust to the trustees while administering the trust properties. These explicit powers, which are categorical and unambiguous, grant the trustee specific powers for sale of properties, investment of proceeds of sold properties, collection of sale proceeds and distributor of the same to beneficiaries. The trustee also gains implied powers that are needed during the course of his onerous duties. Further, the trust owner may grant powers to the trustees to perform certain prescribed or recommended tasks like investing the proceeds of sale of trust in specified bonds. This is a compulsory or vital power. If execution of this trust is not carried, it is a breach of contractual trust and the beneficiary (ies) could obtain a Court Order to enforce the trustee for specific performance, or the Court could enforce damages on the part of the trustee for failure or delay in performing the specified tasks . The Court is also empowered to remove the existing trustee from his/her post and appoint another trustee in his/her place. Thus, it is evident that there are strict rules and regulations within the ambit of trusts that need to be administered and enforced, irrespective of the genre of trust to which it may belong. Besides, there are other subjective and objective matters which need also be considered in the matter of trusts. For one thing, the main aspect that allows for trusts is the contractual obligations that arise out of covenant. In the absence of any covenant, it is the admission of reigning laws of the region in which the trust is created and enforced. These are important considerations since the trust need to operate within the ambit of the law and also the underlying contract that has provided genesis and sustenance to it. Besides, trusts are indeed evolving aspects and need to also consider the present state of affairs of the law and how enforcement of such trust clauses could be executed. A claimant can establish a proprietary interest in a shared family home, and if so what size his/her interest should be, especially when ownership of family homes arises informally. When these ordinary principles of law would be displaced and special statutory frameworks for determining property rights in these circumstances. Consider the discussion below on shared family homes, in the light of the learning resources you used for the PBL activity in this area, from the Block Guide itself and recommended reading; and also insights from the plenary session(s). Claimant can establish a proprietary interest in a shared family home, and if so what size his/her interest should be, especially when ownership of family homes arises informally. when these ordinary principles of law would be displaced and special statutory frameworks for determining property rights in these circumstances. Liberalized regime signaled by Stack v Dowden [2007] that the courts could be and perhaps should more creative in terms of what counts and for how much with quite a lot of this focused on home-making and child care. And for a long time those who have suggested that the courts approach leads to injustice for claimants have attributed this to an absence of a clear statutory framework for determining property entitlements beyond formal relationships, and have called for Parliament to rise to this. In the case of Stack v.Dowden  HOUSE OF LORDS SESSION 2006-07 (2007) UKHL 17 on appeal from (2005) EWCA Civ.857 the question arouse as to the property rights of a cohabiting couple in a house which they occupied together as their home until the breakdown of their relationship. They have an obvious interest in the determination of their respective property rights in such a valuable asset. But the issue between them is a matter of general public interest too. It has become an increasingly pressing social problem, as house prices rise and more and more people are living together without getting married or entering into a civil partnership. The situation is complicated by the fact that there is no single, or paradigm, set of circumstances. The only feature which these cases have in common is that the problem has not been solved by legislation. The legislation which enables the court to reallocate beneficial interests in the home and other assets following a divorce does not apply to cohabiting couples. Otherwise the circumstances which define relationships between cohabiting couples and their property interests are infinitely various.3 It is obvious that the laws that apply to marriage and divorce laws do not apply in the case of split up of cohabiting partners. In this case, there are a plethora of Laws regarding marriage and divorce laws, but there are a spattering of diverse decisions regarding cohabitation and how property matters resulting for dissolution of cohabitation could be settled. Thus there is crying needs for the reform process in the case of property sharing in case of non marriage or non contracted property disputes in trust. The Discussion paper 2002 laid emphasis on the intricate tenets found in the law of Sharing Homes as against trusts and propriety estoppels which makes out when and the extent to which an individual who does not have a legal right could lay claims on shared homes. The approaches taken in 2006-7 also takes into account significant aspects enunciated in the Civil Partnership Act 2006. The approached taken during 2006-7 is much narrower in scope since it is categorically confined to the economic results of the termination of cohabiting nexus whether due to separation or death. Thus the main aspect that is being considered is that of the transpirations at the time of separation. The central recommendation that is made is that although “there are some statutory remedies that may be claimed on separation, they are of limited scope and utility. There is relatively short-term protection from domestic violence, and residential tenancies may be transferred from one cohabitant to another by order of the court. While the court does have extensive powers to make orders for capital provision for the benefit of children, they are surprisingly rarely used. But there is nothing else.”4 Coming to the central issue, it needs to be stressed that cohabiting couples need to remain loyal to the terms and conditions of cohabitation which was enforced at the beginning of their relationship. As far as their shared home is concerned, it would indeed involve a declaration of trust to avoid future complications and legal dissents. Thus if agreement is made before hand to the various aspects of sharing board and property, and there is no slip ups from both sides, this should not be a major issue in the event of death or dissolution of the cohabitation contract. Therefore in the event major conjugal matters have not been taken up; it needs to be quickly done before it is too late. In the normal course the Courts would certainly not interfere in matters in which there is consensus or lack of conflict. The main need for Court intervention would be in matters of regulating the financial and economic affairs, especially when there is a conflict of interests. In such a case the Court would have to intervene and enforce a contract regulating and controlling the financial and pecuniary interests of the cohabitating couple. This became concentrated around the use of implied trusts, and especially the constructive trust, enforced by courts and the due process of law, as so-called ordinary principles of law as applied to situations where ownership of family homes arises informally. when these ordinary principles of law would be displaced, and hopefully it will have understood that this only ever happens when the parties have formalized their relationship with marriage or a registered civil partnership, and then only where the relationship has broken down and beneficial shares of the family home becomes part of the computation of calculus of ancillary relief. This reflects the special statutory frameworks for determining property rights in these circumstances. Even under a liberalized regime signaled by Stack v Dowden [2007] that the courts could be and perhaps should be more creative in terms of what counts and for ?how much’, with quite a lot of this focused on home-making and child care. And for a long time those who have suggested that the courts approach leads to injustice for claimants have attributed this to an absence of a clear statutory framework for determining property entitlements beyond formal relationships, and have called for Parliament to rise to this. This is notably the Law Commission, as would be seen from reading any of its publications in this area. In recent times, in the recommendations made by the Law Commission in its work on cohabitation (the 2006 Consultation Paper, and 2007 Report on Cohabitation: The Financial Consequences of Relationship Breakdown) it is stated that “the legal treatment of cohabitants is an extremely difficult area. It involves significant questions of social policy and engenders strong responses. It is complex in terms of law and social impact. Broad questions of social policy remain a matter for Parliament. As a law reform body, the Law Commission is best qualified to address any technical deficiencies of the law and to recommend ways in which reform could be effected.”5 Besides financial awards as envisioned by the Law Commission and the interaction that the award made are seen as having with the contributions made by the parties to the relationship overall are also major areas of significance. There will be a large number of relationships wherein these provisions cannot be made applicable or enforceable is wont apply either because relationships are not eligible ones, or where couples eligible have opted out, and that where this is the case that the current law (as developed from Lloyds Bank v Rosset [1991]) will continue to apply. In this case, the wife, Mrs Rossett claimed beneficial interest in property which was being held in trust by her husband, Mr Rossett, “binding the bank by virtue of her actual occupation, as an overriding interest under the Land Registration Act 1925, s.70(1)(g).”6 “In the Court of Appeal in Rosset, where Mrs. Rosset won, most of the discussion revolved around whether Mrs. Rosset was in actual occupation when the charge was created, in order to be able to rely upon s. 70(1)(g). The House of Lords were able to avoid all discussion of s. 70(1)(g), simply holding that Mrs Rosset had no beneficial interest. There was no evidence of any agreement between the parties to share the beneficial interest (first category), and the wife's contributions were regarded as de minimis (second category).”7 Conclusion: Finally, Yes, I agree with Sir Nicholas Wallace views that cohabiting couples should have the same legal rights as married couples. This is because it is unjust that people are deprived of their fundamental rights and privileges under property laws just because they are not married but are cohabiting due to extreme reasons like non availability of houses and apartments or economic constraints. The law does not view cohabitation in the same way as marriages. From the viewpoint of law, rights and interests of cohabitants are severely compromised if the cohabitation ceases to exist, or is dissolved, since there is no legal amour that could protect them. Thus, it becomes necessary to take a broader view of cohabitation and prescribe laws and regulations that could treat them within range of marriage laws if not at par with them. Personally, I feel that jurisprudence in these areas need to broaden to include various facets of trusts and their operations. Having a set of laws to deal with trust matters just within the purview of marriages and divorces is not the real answer, and it thus becomes necessary to consider trust matters outside the ambit of marriages, like live-in relations, cohabitation and the like. Trusts laws need to be modified and upgraded to deal with financial, property and legal matters that may arise in any kind of relationship, sanctioned or otherwise. It is also necessary to enforce just, equitable and satisfactory legal solutions to these aspects of societal living also. Bibliography What is Trust Property, ‘Wise GEEK’ [2011] accessed 10 March 2011 Judgments - Stack (Appellant) v. Dowden (Respondent), ‘parliament’ [2007] accessed 10 March 2011 D Robinson, The Law Commission Consultation Paper No 179, ‘Lawcom’ [2006] http://www.lawcom.gov.uk/docs/cp179.pdf accessed 11 March 2011 V Rosset, Lloyds Bank plc v. Rosset, ‘House of Lords’ [1991] http://pntodd.users.netlink.co.uk/cases/cases_r/rosset.htm accessed 11 March 2011 Read More