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Discretionary Trust - Essay Example

Extract of sample
Discretionary Trust

There are four requirements of a trust, which are capacity; formality; certainty and constitution, each factor is important in creating a valid trust and in order to determine the validity of each disposition within the will these requirements must be fulfilled.
This requirement concerns the creator and beneficiary of the trust; whereby any person can create a trust if thy have the ability to own any type of property, with four exceptions; minors whom cannot own land therefore cannot create a trust of land but can be a beneficiary of a trust until the appropriate age; any mentally disordered person under the 1983 Mental Health Act cannot create a trust but can be a beneficiary of a trust; corporations can only create a trust if there is a power in their memoranda of association; and statutory bodies can only create a trust if there is this power within the enabling legislation. There are also limitations to two further types of beneficiaries which are; non-citizens of Britain whereby they can hold a trust in any property but British ships and aircrafts; and trustees who cannot be the sole beneficiary and sole trustee. However the general rule is that any person who has the capability of owning property can create or be a beneficiary of a trust.
Formality:
Generally trusts can be created in any manner, because equity deals with the substance of the trust not its formal requirements. Therefore as long as the creator of the trust makes their intentions clear then a trust will be upheld by the courts. However a trust in land is a different situation whereby it must comply with the Law of Property Act 1925 section 53(b) and 53(c) for existing equitable interests in land whereby; "a declaration of trust respecting any land or interest therein must be manifested and proved by writing signed by the person who is able to declare such trust or by his will (LPA 1925 53(b)). It will it is assumed that it meets the formal requirement because there is no information to the contrary; however it must be kept in mind that if the formal requirements were not met then it would not be a valid trust, when considering the dispositions certainty and constitution will be the main focus to ensure the trusts in the will can be upheld. However there may be a problem with the transfer formalities of the shares, which will be discussed with reference to the constitution of the trust.
Certainty:
The creator of the trust must make his intentions clear when creating his trust; he must make it clear which property is subject to the trust; and finally he must identify the beneficiary of the trust. In Wright v Atkyns1 it was determined that the words must be imperative, but there does not have to be created with the word trust or obligation2 but sufficient intention must be apparent from conduct and words3. The court will always aim to impose a trust as long as the intention of the creator is present. In relation to the subject of the trust this also must be clearly stated, whereby the exact size and amount of the subject matter is clear, e.g. the bulk of my estate4 is not clear ...Show more

Summary

A trust is a tool of equity to ensure that the intention of the creator of the trust is fulfilled and in the case of constructive trusts the courts use this tool to ensure that justice is fulfilled. The problem that the law commission is discussing refers to the formalities that surround the creation of trusts, disposition of equitable interests and transfer of certain types of trust property that sometimes causes uncertainty of law and/or inequity to happen…
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Discretionary Trust essay example
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