Trust and Equity Issues - Coursework Example

Trust and Equity [Name] [Professor Name] [Course] [Date] [WORDS 1498] Introduction To advise a trustee and executor on likely actions upon the death of the settlor, equity and trusts have to be established. It has to be established whether trusts exist based on certainties and capacities1. At the same time, the effects of covenant in a trust deed have to be considered. Equity describes that that is fair, while trust is the relationship that exists when a settler (person creating the trust) requires another individual (a trustee) to hold property (in equity) for the beneficiaries2. This paper presents a case analysis to advise a trustee and executer (Greta Granforth) on the validity and effect of Clause (a) of the settlor’s (Oscar’s) Will and whether any of the assets mentioned in clauses in the Deed of Settlement are likely to be considered as estate on the settlor’s death. In Scenario a of the question, in order to advise Greta on the validity and effect of Clause (a) of Oscar’s Will as well as whether any of the assets stated in Clauses 1 and 2 of the Deed of Settlement are likely to comprise part of Oscar’s estate on his death, it must be established whether a trust exists. Therefore, the central issue concerns the validity of Oscar Osano's will. Wills are regulated by the law of trusts. The criteria for valid trusts are indicated in the case law Knight v. Knight3, where the court held that three types of certainty have to exist for the trust disposition to be considered valid. The three forms of certainty include certainty of objects (CO), certainty of subject matter (CM) and certainty of intention (CI)4. First, it has to be established whether the trustees are needed to perform the wishes of the settler. It must be ascertained whether Oscar's intention is to create a trust rather than something else. For instance, it must be certain that the settler comprises a trust rather than a donation5. This comprises the certainty of intention. In which case, the words used in the will have to be imperative, as held in the case Wright v Atkyns6. This implies that the words should express a command. It also implies that it has to be clarified that Dario and Greta hold the properties for the benefit of the stated beneficiaries. This argument is supported by the case Re Adams and Kensington Vestry7, where it was reasoned that the words used in creation of the trust must be absolutely clear, in a manner that ensure no confusion regarding the intention of the trust. In the case Re Hamilton, it was established that all the words used in creation of the trust have to be taken into consideration. Additionally, there exists a maxim in equity, which states that equity considered the intent instead of the form. Put differently, equity has to consider the substance of a transaction rather than merely focus on formalities8. In the case Re Kayford9, it was clarified that a trust be created without necessarily using the words “confidence” or “trust.” In the present case scenario, Oscar made it clear that Greta all his (Oscar’s) estate be held on trust and to be “divided equally between all the employees of Fix-It Limited who completed the building work at 25 Park Lane, Lyndon to enable the store to be opened for business on schedule on May 1, 1974.” Oscar’s words are utterly clear. Hence, there appears to be certainty of intention. Hence, Oscar created an express trust rather than a donation. Certainty of subject matter has also to exist. This implies that the settler has to identify who should be the subject matter as per the trust. The trust should be specific about the subject matter rather than general10. In the case Palmer v Simmonds11, the subject matter was generalised, hence it was held that the certainty of subject matter did not exist. This also implies that Greta has to clarify what the subject matter has to comprise. Indeed, it was stated in the case Re Goldcorp Exchange Ltd 12that specific property has to be identified to qualify it as transferral. This implies that the property or estates have to be identified independently, rather than in general. Still, some recent case laws such as Hunter v Moss and Holland v Newbury13 state that there is no necessity to individually separate or identify the shares proposed for the trust since they (shares) are perceived to be a special case because they are wholly identical and not capable of being identified individually. In the present scenario, Clause (a) of Oscar’s Will identifies the subject matter since he used the words “all my estate on trust.” This is sufficient for certainty of subject matter to exist. The trust of “all my estate on trust” does not fail on grounds of linguistic or conceptual uncertainty, since the language Oscar uses is can be understood and applied with certainty14. Since the court can establish how much of Oscar’s estate constitutes “all my estate on trust.” The very concept is therefore certain15. Certainty of object concerns who the beneficiaries should be. In the case law Re Endacott16, it was established that the certainty on who the beneficiaries, under the trust also need to be established. In the case law, a fixed trust can only be applicable when the beneficiaries are clearly identified, are ascertainable or ascertained17. In the present case scenario, Clause (a) of Oscar’s Will does not clearly identify or ascertain who the beneficiaries are, as it identifies them in general. Clause (a) of Oscar’s Will uses the words “all the employees at Fix-It Limited.” This is insufficient for certainty of object to exist. However, another classic case on certainty of object is McPhail v Doulton18, where it was held that in the event of a discretionary trust, certainty of object would exist if it can be determined whether any suggested person is a beneficiary or not. In this the case McPhail v Doulton, the words used were “my relatives and dependants of staff” to which the court held consisted of conceptual certainty. Hence, certainty of object also exists. In scenario two of the question, Oscar had initially executed a executed a Deed of Settlement, in which he appointed Dario as trustee for ten diamond-encrusted watches and shares in Lustrano Limited. However, later in the day, he made another will under Clause (a), in which he appointed Greta as the executor and trustee. As mentioned in Matter of Rappaport19, a Will is essentially a testamentary trust. Oscar’s Will is testamentary trust since it is found in his last will and testament. As established in the case, Sutherland v Towle20, a testamentary trust is invalid until the person in whose Will the trust exist dies. Hence, until Oscar dies, the testamentary trust is revocable at any time and assets cannot be placed into the trust. This fact was established in the case Saunders v Vautier21. Therefore, determining whether any of the assets mentioned in Clauses 1 and 2 of the Deed of Settlement are likely to be part of Oscar’s estate on his death, depends on how the trust is created. As mentioned in the case Milroy v Lord22, a trust may be Will or by Inter Vivos (IV). By Will is effective upon death while IV is effective during lifetime23. In the case, Oscar has transferred the property to the trustees, and later on 30th September 2014 declared in Clause (a) that Greta holds “all my estate on trust…” for the beneficiaries. Therefore, in the second scenario, Greta is the trustee or executor of Oscar’s estate, and holds it for all the beneficiaries Zara, Anna, Bella, Clara, and all the employees of Fix-It Limited. On Oscar’s death, Greta would take the effect of transferring Oscar’s assets, whether real property or personal property to the beneficiaries24. This indicates an express trust (ET), which are created expressly and intentionally as declared by the settler. Still, the terms of ET have to be established before it could be assumed to be a trust. In this regards, issues such as certainty and capacity have to be addressed25. Concerning certainty of intention, Greta has expressed his intention to create a trust. Indeed, as established in scenario one, certainty of objects (CO), and certainty of subject matter (CM) also exist26. However, capacity can only be established (as outlined in Knight v Knight) only once it is established that Oscar died after the cruise-ship on which he was sailing was destroyed by a tornado. In concluding for the first scenario, Greta should be advised that the effect of Clause (a) of Oscar’s Will is valid. This is since a trust exists. Greta should also be advised that the assets mentioned in Clauses 1 and 2 of the Deed of Settlement are likely to comprise part of Oscar’s estate on his (Oscar’s) death. [WORDS 1498] References Journals, Books and Articles Charlie Webb and Tim Akkouh, Trusts Law (Palgrave Macmillan 2011). Gary Watt, Equity and Trusts Law Directions (Oxford University Press 2014) Langbein J, "Questioning the Trust Law Duty of Loyalty: Sole Interest or Best Interest?' (2005) 117(1), The Yale Law Journal 929-932 Langbein J, 'The Contractarian Basis of the Law of Trusts,' The Yale Law Journal (1996) 105(1) 627-674 Law Commission, Chapter 6 Appointment and removal of trustees (Law Commission 2014) accessed accessed 6 Dec 2014 Moffat G, Bean & Rebecca Probert, Trusts Law: Text and Materials (Cambridge University Press 2009) Orly Henry, 'If You Will It, It Is No Dream: Balancing Public Policy and Testamentary Freedom', (2011) 6(1), Northwestern Journal of Law & Social Policy 120-137 Philip Ruce, 'The Trustee and the Remainderman: The Trustee’s Duty to Inform,' (2011) 46(1), Real Property, Trust And Estate Law Journal 174-197 Popovic-Montag, S 'Inter Vivos Gifts – Sufficient Acts of Delivery,’ (Hull & Hull 2014) < http://estatelaw.hullandhull.com/2012/10/articles/topics/estate-trust/inter-vivos-gifts-sufficient-acts-of-delivery/> accessed 6 Dec 2014 Raymond Radigan and Jennifer Hillman, 'The Evolution of Trust Reformation and Modification Under New York Law,' (2012) 1(1) New York Law Journal, 1-4 Rebecca Probert, Family Law in England and Wales (Kluwer Law International, 2011) Sheena Grattan and Heather Conway, "Testamentary Conditions in Restraint of Religion in the Twenty-first Century: An Anglo-Canadian Perspective," (2005) 50(1) McGill Law Journal 511-552 Sophan Pearson, The Testamentary Promises Act: To Be Or Not To Be? (University of Otago 2011) Case Laws Holland v. Newbury [1997] 2 B.C.L.C. 369 In re Rappaport, 21 Misc.3d 919 Kensington Vestry (1884) 27 Ch. D. 394 Knight v Knight (1840) 49 ER 58 Matter of Rappaport [2008] NY Slip Op 28397 [21 Misc 3d 919] Milroy v Lord [1862] EWHC J78 Palmer v Simmonds. [1854] SC 2 W. R. 313 Re Endacott [1959] EWCA Civ 5 Re Kayford Ltd [1975] 1 WLR 279 Saunders v Vautier (1841) EWHC Ch J82 Sutherland v Towle [1937] GLR 509 at 510 and 511 Wright v. Atkyns (1823) Turn. & R. 143, 157 Read More