Essential Components of a Valid Trust - Essay Example

Equity and Trusts Introduction: Equity developed in the early middle ages as a means of alleviating the strict application of legal rules by the courts of common law. Equity is the means by which a system of law balances out the need for certainty in rule making with the need to achieve fair result in individual circumstances. An expression, which has been commonly used to describe the way in which equity functions is that equity ‘mitigates the rigor of the common law’ so that the letter of argument not applied in such a strict way that it may cause injustice1. As anyone who has read Dickens, Bleak house will know, by the 18th century, equity had itself become rigid. The origins of the jurisdiction have been prevailed and the principles of equity can now be applied in every civil court in the land. One of equity’s greatest inventions has been the ‘trust’. The trust is a form of ownership that developed in England through the courts of Chancery. Trust can be defined as the written instruments that give title to or an interest in real estate. A trustee holds title on behalf of the lender, known as the beneficiary who is the legal owner. Trust law applies whenever one person has placed trust and confidence in another person to manage his or her affairs. The full force of the law of equity governs such relationships and the trust now provides a mechanism for a number of situations, family relationships, charities, pension funds, to name but a few. The common benefits that a trust offer includes are: (i) Providing financial and personal safeguard for family and other beneficiaries, (ii) Establishing a means of controlling or administering property, taxes, (iii) Meeting other social or commercial goals, and (iv) Postponing or avoiding unnecessary. The trust performs a very simple trick; it enables more than one person to have rights in the same property simultaneously. The trick is simple but it has complex ramifications. In short, the trust permits a division in the ownership of the trust property between a trustee and a beneficiary so that the trustee is compelled to act entirely in the best interests of the beneficiary in relation to the management of whatever property is held on trust1. They are four principle types of trust: Express trust, Resulting trusts, Constructive trusts, and Implied trusts. In a trust, the legal ownership of property split. So called ‘trustees’ control the property, whereas the beneficial ownership of the trust property is held by people known as ‘beneficiaries’. Trusts are used mostly for holding large amount of money. Trustees owe things called ‘equitable duties’ to the beneficiaries who they hold trust property for. They must use the trust property for the benefits of the beneficiaries, rather than for themselves. Depending on the particular trust law of the jurisdiction, the nature of the trust property and the terms of the instrument that created the trust, the trustees will usually be expected to invest it or sell it, allow the beneficiaries to reside in it, or to transfer it to the beneficiaries absolutely. Essential Components of a valid trust: They are many important components, terms, and conditions to a trust to be valid: To create a valid trust, the terms that trust must be sufficiently certain. They are three forms of certainty, which the court requires: (i) certainty of intention to create a trust, (ii) certainty of the identity of the subject matter comprising the trust fund, and (iii) certainty of the beneficiaries of the trust1. There is no requirement to use a specific form of words for trust over property other than land. The trust fund must be identifiable. A trust in which the trust property is mixed with other property, so that it is impossible to identify precisely which property is held on trust, will be invalid. To identify the beneficiaries, it is first necessary to identify the nature of the power, which is being exercised. Some of the other important terms and conditions for a trust to be valid are: (i) The assets constitute a separate fund and are not a part of the trustee’s own estate, (ii) Title to the trust assets stands in the name of another person on behalf of the trustee, and (iii) The trustee has the power and duty, in respect of which he/she is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon by Law. The components, terms, and condition mentioned change accordingly to the different type of trust. The trust type depends on the following conditions: (i) The amount and type of property it will contain, (ii) The duration, the trust will last, (iii) The beneficiaries and their specific needs, (iv) Any conditions that must be met by a beneficiary to receive benefits, (v) Alternatively for disposing of assets in case the trust conditions are not met or circumstances change, and (vi) The trustee, and the conditions or guidelines under which he or she will function Primary and Secondary sources of law to provide a substantial accurate picture of the state of the law of trusts: The law sources, generally falls into two categories—primary sources and secondary sources of law. Primary Sources of Law: A primary source can be defined as a document that establishes the law on a particular issue, such as a case decision, legislative act, administrative rule, or presidential order. Keeping in mind that, the government is divided into three branches, which is helpful in distinguishing the sources of primary law. The Legislative branch is responsible for creating laws. Laws are organized by subjects into sets called codes. The Judicial branch interprets the laws. Courts issue opinions in the form of case law. Cases are complied into sets called reporters. Case reporters contain published cases from a particular court or jurisdiction or on a specific topic. Indexes for the case reporters are called digests. The Executive branch enforces the law passed by the legislative branch. Most of the actual enforcement duties are delegated to administrative agencies who then issue regulations. Primary source of law includes enacted law, custom, and general principles. Enacted law includes legal rules adopted by the legislature, the executive and administrative agencies. The various types of enacted law form a hierarchy with the constitution at the pinnacle, followed by legislation, then by executive decrees, then by administrative regulations, and finally by local ordinances. Primary source of law are also called as the general principles, derived from norms of positive law or from the existences of the legal order itself 2. Secondary Sources of Law: A secondary source can be defined as, any publication that indexes, summarizes, or interprets the law, such as a legal article in a law review. Secondary sources are often referred to as finding tools, because they help the researcher to find primary sources on the topic they are researching and to learn how those sources have been interpreted by others. We should first refer to secondary sources to learn about the issue and find relevant primary sources concerning it2. Secondary sources provide commentary and interpretation of the law. Attorneys and students often use secondary sources as a starting point when they are researching an area of the law. Lord Wilberforce found that there were two trusts: a primary trust, to use the money to pay the dividend, and a secondary trust, to return the money to the lender if it was not used to pay the dividend1. As mentioned in the question that Jack gave Katie sealed envelops that contained Jack’s will, which contained the following clauses. ‘My trustees shall allow my four best friends to each select an item of antique furniture from my house, which they may keep as a memento of our friendship. ‘My trustees shall give the remainder of my antique furniture to such of my family and friends as they shall in their absolute discretion deem appropriate.’ Katie’s envelope contains the keys to Jack’s car, together with the vehicle registration document, a gold watch, and a cheque for £20,000 made payable to Jack. Joanna’s envelope contains a signet ring and a share certificate for 1,000 shares in Big Co Ltd. Following clause comes under the acceptance of the office of trustee; they are two reasons for the rule to be apparent. First, the basic of the secret trust was the avoidance of fraud on the part of the secret trustee, and therefore it is important that the secret trustee has accepted the office before such a standard can be imposed. Secondly, the trustees are to be given the opportunity to turn down the office, particularly given the sensitive nature of holding property in such circumstances. Communication and acceptance can be effectuated at any time during the life of the testator. However, acceptance can also be by sealed envelop given to the trustee before the testator’s death, with instruction not to open until after death, as considered in the foregoing section. The office of trustee under a fully secret can be accepted in one of two ways. Where a person, knowing that a testator in making a disposition in his favor intends it to be applied for purpose other than his own benefits, either expressly promises, or by some other reason1. First, we shall consider that no will shall be valid unless: It is in writing, and signed by the testator, or by some other person in his/hare presence and by his/her direction, It appears that the testator intended by his signature to give effect to the will, and The signature is made or acknowledged by the testator in the presence of two or more witness present at the same time. Each witness either attests and signs the will or acknowledges his signature, in the presence of the testator. A Trust (unlike a power of distribution) is obligatory. The trustees have no choice as to whether or not they may fulfill the intention of the settlor. The trustees are required to fulfill the terms of the trust as stipulated in the trust instrument and implied by rules of Law2. The legal property title to property is a representation to the world that the legal owner has the right to retain and control the property. The equitable title is the right to enjoy the property The question satisfies all the conditions required; therefore, they will not be any problem in doing as the will says. According to the law a person have a right to give anything from his property to anyone he/she like under certain circumstances, but this condition change a little in case of a trust, and the above will in the question satisfies approximately all the conditions accordingly, therefore there is no question of dispute or any other problem. Reference: Ramjohn, Mohamed. (1998). Source Book on Law of Trust. London: Cavendish Publishing. Hudson, Alastair. (2005). Equity & Trust. London: Cavendish Publishing. Read More