Express trust

Wills, trusts and estates

Part of the common law series

Wills

Wills (legal history) Joint wills and mutual wills Will contract · Codicil Holographic will · Oral will

Sections Attestation clause Residuary clause Incorporation by reference

Contest Testamentary capacity Undue influence Insane delusion · Fraud

Property disposition Lapse and anti-lapse Ademption · Abatement Acts of independent significance Elective share · Pretermitted heir

Trusts

Express · Constructive · Resulting

Common types Bare · Discretionary Accumulation and Maintenance Interest in possession Charitable · Purpose · Incentive

Other types Protective · Spendthrift Life insurance · Remainder Life interest · Reversionary interest Honorary · Asset-protection Special needs (Supplemental Needs)

Governing doctrines Pour-over will · Cy-près doctrine

Estate administration

Intestacy · Testator · Probate Power of appointment Simultaneous death · Slayer rule Disclaimer of interest

Related topics

Living will (advance directives) Totten trust

Other common law areas

Contract · Tort · Property Criminal law · Evidence

v • d • e

Where property is passed to a person but no gift is made, it is held for the owner, this is the Resulting trust; where property should for some reason of public policy or fairness or rule of Equity be held for someone other than the legal owner, this is either the Statutory trust or the Constructive trust; but where legal title to property is held by someone on trust, this is the Express trust.

Contents 1 Terms 2 Common forms of express trust 3 Forms of trust used by UK taxpayers 4 Forms of trust used by US persons

Terms

Law generally requires only a simple formality to create an express trust. In certain jurisdictions, an express trust may even be established orally. Typically, a settlor would record the disposition, where real property is to be held in trust or the value of property in trust is large. Where legal title to property is being passed to a trustee, a "deed of settlement" or "Trust Instrument" (for jurisdictions that do not recognise Deeds) may be used. Where property is to continue to be held by the person making the trust, a "declaration of trust" will be appropriate.

Often, a trust corporation or more than one trustee are appointed to allow for uninterrupted administration of the trust in the event of a trustee's resignation, death, bankruptcy or incapacity. Additionally a Protector may be appointed who, for example, is authorized to appoint new trustees and to review the trustees' annual accounts.

To be valid at common law, a trust instrument must ascertain its beneficiaries, as well as the res, or subject matter of the trust, unless it is a charitable trust which does not provide specific beneficiaries.

Common forms of express trust

Bare trust

property transferred to another to hold e.g. for a third person absolutely. May be of use where property is to be held and invested on behalf of a minor child or mentally incapacitated person.

Life Interest trust

the income from property transferred is paid to one person "the life tenant" (e.g. a widow/er) during their lifetime and thereafter is transferred to another person (who may take absolutely or a second life interest according to the terms of the trust, in the second case a third beneficiary would come into play). The trustees may have power to pay capital as well as income to the life tenant; alternatively they may have rights to transfer ("appoint") property to other beneficiaries ahead of their entitlement.

Discretionary trust

the trustees may pay out income to whichever of the beneficiaries they, in the reasonable exercise of their discretion, think fit. They will normally also have a power to pay out capital. They may have extensive powers, even to add new beneficiaries, but such powers may normally only be exercised bona fide in the interests of the beneficiaries as a whole.

Charitable trusts

trusts for a purpose (as opposed to for individuals) are generally invalid at common law however charities are an exception. Persons wishing to pass money to causes not recognised as charitable may instead make gifts to established companies or associations or may establish trusts or trust-like structures in jurisdictions which do not restrict non-charitable purpose trusts (e.g. Jersey trusts, Danish and US foundations and Liechtenstein Anstallts).

Protective trusts and Spendthrift trusts

can be established to provide an income for persons who cannot be trusted with it.

Variation of Trusts in English Law

The Variation of Trusts Act 1958 gave the courts the power to vary trusts in the following circumstances

· s1(1)(a) Any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting; or

· s1(1)(b) Any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class, as the case may be, if the said date had fallen or the said event had happened at the date of the application to the court; or

· s1(1)(c) Any person unborn; or

· s1(1)(d) Any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined.

The court does not have the power to consent to the variation of a trust on behalf of an ascertained individual who is sui juris.(Someone above the age of consent and of sound mind)

Forms of trust used by UK taxpayers

Accumulation and Maintenance trust

A variation on the discretionary trust, the A&M does not carry the Inheritance tax disadvantages of a discretionary settlement but can only be established for persons under 25 who must be entitled to income at that age. Allows the accumulation of income within the trust until 25.

Disabled Trust

Similar to an A&M trust but established for a disabled person.

Reverter to Settlor trust

A trust where, on the death of the life tenant, the property reverts to the person making the gift.

Nil Rate Band Discretionary trust

UK inheritance tax is payable at 40% on estates worth over £300,000 for the 2007-2008 tax year. If assets up to that value are placed in a discretionary trust during a person's lifetime, the trust will not be taken into account for inheritance tax if the person survives for a further 7 years. Likewise in a will, many persons leave a legacy on discretionary trusts so as to take full advantage of their nil rate band (gifts to spouses and registered civil partners being wholly exempt).

Forms of trust used by US persons

Certain US jurisdictions and other jurisdictions have developed a radically different interpretation of the trust. Valid trusts can be established by persons who then continue to deal with property as if it were their own during their lifetime, the trust crystallising on death. Trust funds can be taxed as legal entitles by election ("checking the box").

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