Trusts

The most common method of trust creation is by deed. The settlor executes a deed assigning legal ownership of the property being placed into trust to the trustees, who will then hold that property for the benefit of the trust beneficiaries specified in the trust.

The deed will specify the trust property and name the trustees and beneficiaries. It will also specify the powers of trustees and the rights of beneficiaries. The deed needs to be signed by the settlor and ideally the trustees, to indicate that they accept their position.

Creation by will

Trusts are also often created within wills, either expressly or, for example, as a result of a...

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Half secret trusts

A half secret trust does appear in the terms of the will, but its purpose is not specified.  The legatee is told of objects of the trusts and its purpose. The conditions that need to be satisfied in respect of a half secret trust are similar to those of a fully secret trust, other than the requirement that the testator must communicate the half secret trust before or at the same time as making the will.

Unwritten trusts

An unwritten trust is one that is implied from the actions or circumstances of the parties involved.

For a trust to be valid, there must be three certainties: certainty of words, certainty of subject matter and certainty of objects.

Words – The words must unmistakably show the intentions of the trust. No special words are necessary but using words such as “on trust for…” would provide clarity.

Subject – The property subject to the trust must be clearly specified.

Object – The objects of a trust, i.e. its beneficiaries, must be certain. This can be achieved by specifically naming each beneficiary or describing a class or classes of beneficiaries. Where a trust is being used exclusively for charitable purposes, there is no need to provide for certainty of beneficiaries. Where beneficiaries are described in a trust, the wording should be specific enough to avoid conflict or ambiguity.

Perpetuities and accumulations

Without legislation to the contrary, a trust could last indefinitely, particularly where settlements are intended to provide benefit to a succession of beneficiaries. The law takes the view that assets should not be held in trust for an indefinite period, future interests in property must a...

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The period of 21 years from the date of making the disposition; and

The minority or minorities of any person in being at that date.

Validity of directions to accumulate income

A direction to accumulate income was, under the previous rules, invalid if the accumulation period is longer than:

One of the permitted accumulation periods; and

The perpetuity period

Effects of invalidity

Where there is a direction to accumulate which becomes invalidated by the rules, the income released as a result passes to the individual who would have been entitled had there not been any direction to accumulate. This might not be such an easy thing to establish.

The 1964 Act was reviewed by the Law Commission in 1998. It was concluded that, as well as there being little reason for the rule on excessive accumulations, the rule created practical difficulties for those creating wills and trusts. Therefore, the Perpetuities and Accumulations Act 2009 enables the trustees of most trusts, except charitable trusts, to accumulate income for the whole of the trust period where the settlement is made on / after 6th April 2010.