Creation of trusts—by transfer of property to trustees
Creation of trusts—by transfer of property to trustees

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Creation of trusts—by transfer of property to trustees
  • Creation by transfer of property to trustees
  • Formal requirements to constitute a valid voluntary settlement
  • Chattels
  • Shares
  • Other choses in action
  • Future property
  • Land

Creation by transfer of property to trustees

In practice trusts will frequently be created by a settlor transferring assets to independent trustees on the basis that the trustees will then hold the property on trust for specific individuals. The formal requirements to constitute a valid voluntary settlement (ie for no valuable consideration) must be complied with. A voluntary settlement is fully constituted when:

  1. the instrument declaring the trusts has been executed

  2. everything that is necessary has been done by the settlor, according to the nature of the property, to transfer the property to be comprised in the settlement to the trustees

In practice the types of property assigned in a settlement are:

  1. interests in other settlements

  2. insurance policies

  3. debts

  4. chattels

  5. company shares

  6. land

Solvency before and after making an undervalue transaction is important in preventing the setting aside of that settlement. Although uncommon in practice, the settlor may wish to make a declaration of solvency before the creation of a trust.

Formal requirements to constitute a valid voluntary settlement

The settlor must have done everything necessary in order to transfer the property to the trustees. The transfer must be legal to be effective and must not be against public policy or the law. Where the settlor makes a voluntary settlement and it is not completely constituted, it will be unenforceable.