Express Trust Issues - Essay Example

Express Trust (Equity and Trusts) Fiduciary Principle Question: What is the fiduciary principle What is its basis What is its relationship to express trusts Answer: The fiduciary principle comes from the "term fiduciary itself is derived from the Latin fiduciarius, meaning 'faithful'." (Hudson 2008) It is a characteristic that covers certain relationships and it integrates into those relationships good faith, loyalty, confidence and legal obligation to uphold the purpose of that certain relationship. The fiduciary principle is fundamentally based on common or communally accepted good that is morally binding on the direct participants in a relationship. This greater value in society is none other than loyalty and commitment to a certain purpose once you have bound yourself to it. This may also be associated with duty which by the ethical and moral norms of society you must perform. This is even characterized as a higher form of justice and so important to modern human relations that it has been transformed from a purely ethical concept with limited application to a moral norm of society. Every member of society is bound to uphold it and even becomes embodied in laws. Express trusts are "built around concepts of loyalty and good faith" (Hudson 2008). In an express trust there exist a relationship where a person entrusts his or her property to another to keep, preserve and latter to give the same property to another person who is meant to benefit from that property. Moreover "The trustee is one example of a more general concept of English law: the fiduciary. Thus, it is often said that trustees bear 'fiduciary duties'. For our purposes the terms 'trustee' and 'fiduciary' can be read as being synonymous. The fiduciary principle in express trusts is the idea that such trusts have a nature that it is a matter of confidence, good faith, loyalty and legal obligation to the purpose of such trusts. An example of this is when a grandfather entrusts a piece of land to his son which his son will give to the grandson on his 18th birthday. The father, son of the grandfather, has the duty to his father, the grandfather to keep, preserve and maintain the piece of land and later give the land to his son, the grandson. Duties & Powers Question: What are the powers and duties of the settlor What are the powers and duties of a trustee What are the powers and duties of the beneficiary Answer: The settlor is duty bound to make certain that the property that will be put into an express trust is truly owned by him because "the settlor must have had all of the rights in that property, or 'absolute title', before the declaration of the trust". Clearly, one cannot deal with property in which one has no rights: therefore, the settlor must hold all of the rights to be settled on trust before that trust can be declared" (Hudson 2008). The settlor is the original owner of the property involved in the trust. Thus absolute title means that the right to do with the property as he or she pleases regardless of the concern of others or free of implications to other individuals. This includes sell, lease, destroy and even donate. The settlor has absolute power over the property up to when the trust is constituted. Once it begins his direct power over the property is set aside and he is duty bound to give possession of the property to the trustee. "Once the trust is created, the trustee acquires 'legal title' in the trust fund and the beneficiaries acquire the 'equitable interest' (or, sometimes, 'beneficial interest') in the trust fund in accordance with the terms of the trust" (Hudson 2008). The Legal title which the trustee acquires when the trust is created continues to exist so long as the trust exists. This refers to the power of the trustee to keep, possess and hold the property for a particular purpose which usually is the safekeeping and protection of the property involved for the beneficiary. There are also instances where the trustee is commanded by the terms of the trust to apply or use the property in a certain way but limited to what conditions of the trust provide for. An example of this is when the trust has the condition that while it exists and the property has not yet been given to the beneficiaries it has to be invested some way. The beneficiary is the person or persons for whom the property is meant and who will benefit from the property as intended by the settler. It is just that when the settlor decided to pass the ownership of the property to them they are not yet capacitated to receive it or the settlor meant for them to receive the property at a later time. Hence the term equitable interest pertains to the interest or relationship of the beneficiaries to the property wherein former is to be benefitted by the latter. This refers to the future conferment of full or absolute ownership over the property when the trust is ended and the property becomes fully owned by the beneficiaries. The beneficiaries are duty bound not to take the property until the trust ends or when the conditions are met where the property may legally be transferred to them. They have the power to insist on the proper enforcement of the terms and conditions of the trust if they feel that such is not being followed. Moreover since they have the most substantial interest in the property entrusted they can have the trustee replaced via court order if the trustee has breached or abused the trust especially the property entrusted. Trustee Investment Question: Can the trustee validly invest in the entrusted property Can the trustee acquire rights to the property and if so to what extent In what instances will the trustee not legally gain part of the entrusted property Answer: The trustee may invest in the property entrusted to him or her but there are limits and this is meant from enabling the trustee from gaining greater ownership and interest over the entrusted property especially to the detriment of the beneficiaries. Furthermore "In creating a general power of investment, the Trustee Act 2000 also provides that that power is both in addition to anything set out in the trust instrument but also capable of being excluded by any such trust instrument" (Hudson 2008). Therefore, "the settlor could preclude the trustees from making particular forms of investment" (Hudson 2008). An example of this is when the trustee following the terms of the express trust invests in the property by building on it and making improvements which cost more than the property then after the trust ends claim either for reimbursement of the costs to build or in most cases that the ownership of property be transferred to him since he now has greater right and interest in it compared to the beneficiaries. The trustee can trustee acquire rights to the property. However according to the "The fair-dealing principle validates acquisitions by trustees of the interests from the trust provided that the trustee does not acquire any advantage attributable to his fiduciary office." (Hudson 2008). An example of a valid acquisition of rights over the property is when the terms of the trust provides that when the value of the property increases the trustee will acquire 5% of the of all the increases up to the end of the trust. In this case the trustee A trustee cannot legally gain part of the entrusted property when the settlor when created the trusted added as a condition that the trustee cannot legally gain part of the entrusted property, when the investment of the trustee violates the "The fair-dealing principle" and when the trustee fraudulently transfers the ownership over entrusted property whole or in part to himself. Breach of Trust Question: What is a breach of trust in an express trust What is an example of a breach of trust What are remedies to a breach of trust measures t Answer: A breach of trust is the betrayal of the trust. It particular it is going against the fiduciary nature of the trust and undermining the trust given to him and prejudicing the rights and interests of the beneficiaries. An example of breach of trust is when the trustee violates the terms of the trusts or worst he fails to meet the fiduciary requirement of the trust and fail in his duties to the trust such as when he fails to preserve the property and it depreciates or is even lost. Breach of trust also occurs when the trustee misappropriates the property or defrauds the beneficiaries by selling or using the property for purposes not provided in the trust. When there is a breach of trust there are consequences; "First, a liability to recover the specific property that had previously been held on trust and which was misapplied in breach of trust. Second, a liability to account to the beneficiaries for the cash equivalent of the loss caused to the trust fund: in short, to write a cheque for that amount. Third, by extension to the second remedy, a right to equitable compensation for any further loss caused by the breach of trust. Each is considered in turn in this section. It should be noted that the common law standards of foreseeability of harm, proximity, causation and so forth do not apply in equity to breach of trust claims" (Hudson 2008). Simply put there will be recovery of the property, the trustee or any person involved in the breach will compensate the beneficiaries for the loss and damage that resulted from the breach and the beneficiaries and the trustee will also be made to answer for all losses suffered by the beneficiaries after the breach of trust. Liability of this kind usually entails criminal as well as civil liability. A moral and legal responsibility conferred when betrayed in most legal systems merit afflictive consequences to reinforce the idea that this kind of treachery is unbecoming in civilized and just society. REFERENCES: Hudson, Alastair 2008, Understanding Equity & Trusts Third Edition, Routledge - Cavendish, Milton Park, Abingdon, Oxon. Read More