The Essence of a Trust - Essay Example

EQUITY AND TRUSTS By The of the The and location The The essence of a trust is the imposition of equitable obligation on a person who acts on behalf on another called the trustee in dealing with a property in favor of any person called the beneficiary who may have interest in the property. Significant elements to the trust are that it is equitable, provides the beneficiary with the right to property, imposes obligations on the trustee, and that the obligations by nature are fiduciary that is based on utmost good faith. A trust exists expressly established by a person, the settlor who was the owner of the property before the creation of the trust. In this case, an express trust established by the execution of valid deed by Susan on a promise to transfer all the shares in Diaries-4-u Ltd and the entire collection of jewelry kept in safety box number 123 to Trevor Grabbit. A trust based on specific actions, which through interpretation by the court as sufficient to create a trust though the settlor was not aware of the creation of a trust results implied trust. The operation of the law to resolve some disputes on the ownership of a property where creation of an express trust has failed leads to an automatic resulting trust, Recognizing the exclusive rights of one that has contributed to the purchase price of the property leading to a purchase price resulting trust(Haley and McMurtry, 2014, p.5). Any operation of the law to prevent the owner of the property from unconscionably denying those that have fair interest in the trust property result to a constructive trust. An express trust comprises of the settlor, trustee and the beneficiary at the core of which is a collaboration of both personal rights and claims in relation to the trust property.In the stated case, Susan is the settlor with solicitor Trevor Grabbit as the trustee. The beneficiaries are Astrid, who has proprietary rights on the property held in trust by Trevor Grabbit. Further, a letter of intention recognizes her as a beneficiary to holiday cottage, Lake-view though the necessary documentation is not finalized.Barbra is the one who was to inherit Astrid’s property after her death. Carl listed as the third beneficially of the shares in Calenders-R-Us Ltd. The settler who is the absolute owner transfers the legal title to the trustee who has personal obligations in respect of trust property. The settlor ceases to have any property rights in the creation of the trust or any control over the trust in the capacity as a settlor. Once the trust is declared or deemed to be created, as in the case of constructive and resulting trust, the trustee owns the legal title while the beneficiaries own the equitable interest. The trustee owes equitable obligations to the beneficiaries in obeying the terms of the trust. The obligations are fiduciary requiring the utmost good faith and preventing any conflict of interest. The beneficiaries who own the equitable proprietary rights in the trust fund or property can be either one or even many in number. The beneficiaries are in different classes with different rights.The trustee in the agreement is personally liable for any loss caused to the trust by their breach of the trust (Haley and McMurtry, 2014, p.12). Equity bases its mode of operation on the conscience of the owner of legal interest; trust on the other hand requires the conscience of the legal owner to act on the purposes for which the property entrusted to him either express or implied or as the law demands due to his unconscionable act. One cannot, therefore, be a trustee to an agreement if he is ignorant of any facts that affect his conscience, since enforcing trusts mainly depend on the conscience of the holder. Once the trust is established, the beneficiary has proprietary interest in the trust property of which proprietary interest will be enforceable against any subsequent holder of the property. The certainty of intention is critical in order to enforce a trust including the words, the subject, and the object. The criterion for creating a trust includes rules to determine whether a person intends to constitute himself as a trustee through conduct or otherwise. Certainty of subject matter refers to requirements for certainty of the property held in trust as well as the significance of every beneficiary’s interest in the trust.Certainty of objects requires that the identity of beneficiaries be stated with certain clarity (Haley and McMurtry, 2014, p.16). Trusts not hedged about by formalities, though evidence in writing is necessary for the creation of a trust of land and the requirements of the wills Act have to comply with, for testamentary trusts. For a trust, the property transferred to the trustee and until it fully conveyed, the trust remains incompletely constituted. If the trust remains in this state, the beneficiaries cannot enforce it nor can the trustees compel the settlor to transfer, unless a consideration recognized by equity furnished to the trustee or the beneficiaries. In order to create an enforceable trust, it is necessary for the settlor to state the specific property. In addition, the property held in trust need to hand over the property to the trustee. The trust is fully constituted only when the two requirements are met. The exception to this requirement is when a person declares themselves as the trustee to their own property. The formalities are necessary for the transfer of legal interest varies depending on the nature of the property. Legal estates in land are transferred by deed, copyrights by writing, shares of private companies by appropriate transfer document while personal chattels through delivery or deed of gift. If the subject matter of the trust is an equitable interest, the correct transfer is necessary which must be in writing (Haley and McMurtry, 2014, p.28). A trustee holds a responsibility that is fiduciary in nature. A fiduciary is one that has undertaken the responsibility to act on behalf of another that gives rise to a relationship of trust. He has an obligation of loyalty, and the principal is entitled to single-minded loyalty of the fiduciary. He must always act in good faith, which means he must not to make a profit in his dealings. He is not supposed to be in a position of conflict with his duty and position and should not act in his own benefit or that of a third person without the consent of the principal. The trustee expected to act fairly while making investment decisions that may different impacts on different categories of beneficiaries. A fundamental aspect of a trust is an obligation owed by the trustee to the beneficiaries, and that is enforceable. The duty to act and perform the trust honestly and in good faith forms the minimum basis that gives substance to the trust. The law governing trusts does not uphold the contract in which the trustee is excluded liability for fraud or dishonest act. The reason is that trusts based on good conscience and hence would destroy the basis if the trustees allowed acting dishonestly. However, a contract that limits the trustee’s liability for gross negligence can be upheld, as it is not regarded as a matter of conscience but of competence (Haley and McMurtry, 2014, p.35). A beneficiary in a trust is entitled to a proprietary right to access all the documents of trust.The right to exercise whenever the beneficiary desires to inspect upon a judgment passed concerning the trust. However, the right can be denied especially when there are matters of personal or commercial confidentiality where the court may determine the balance for any competing interests. The beneficiary, therefore, has no proprietary rights concerning discretionary or protective trusts. If the beneficiary has proprietary rights in a trust, then he can assert rights of ownership. The principle in Saunders v Vautier provides that if all the beneficiaries acting together decide to do so, they can direct the trustee on how to deal with the trust even if the instructions are in contravention to those of the settlor. The beneficiaries can, therefore, re-write the terms of the trust by taking control of the trust property. In the case, the beneficiary only possesses contingent rights, and the terms of the contract are properly drafted, it can be made impossible for the beneficially to acquire a stake or interest in the trust property. The beneficiary principle provides an argument in favor of a protector as the person in whose favor the court can decree performance and the consideration that there cannot be a trust for abstract purposes without specific benefits to particular people. The principle aims at ensuring that there is someone available to bring matters before the court in the case of a breach of trust by the trustees (Haley and McMurtry, 2014, p.42). There is a distinction between the creation of trusts and contracts in that whereas trustees are entitled to limit their liabilities by contract or other exceptions of liability, they however bear the fiduciary obligations not created by contracts. Constructive and resulting trusts never are they based on any contract between the settlor and trustee, but wholly based on the trustee conscience. The express trusts in which the court determines the existence of a trust from the circumstances do not necessarily require a contract prior between the parties. In such cases, trust created out of conscience and the parties intentions as to the treatment of the property in consideration. The limitations regarded as part of the trust instrument (Haley and McMurtry, 2014, p.45). Astrid’s claims of the contents in the safety box and Lake View are to be upheld, as there is certainty of object in the letter sent to the trustee indicating the property was to be held on trust for her. A key and land certificate further supports the claim. However, there is no certainty of object concerning the shares, though there is the intention to create a trust through the message to the trustee that the property was held in trust for her sister Astrid. Concerning Carl’s claim, the intention to establish a trust is contained in the letter to the bank though there is no transfer documentation to support the transfer. List of Reference Haley, M.A. and McMurtry, L., 2014. Equity and Trusts. London: Sweet & Maxwell. Read More