Nature and classification of trusts—constitution of trusts
Nature and classification of trusts—constitution of trusts

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

  • Nature and classification of trusts—constitution of trusts
  • Constituting the trust
  • Effect of constitution of trust
  • The effective transfer of the trust property to trustees
  • Equity will not perfect an imperfect gift
  • Declaration of self as trustee

Nature and classification of trusts—constitution of trusts

Constituting the trust

In general no trust is created, whatever intention the settlor has manifested, unless legal title is vested in the trustees. This is known as constituting the trust. The trustees must have control of the property. If formalities are required for this transfer, for example in the case of land or shares, then they must be complied with.

A trust is completely constituted by the settlor either:

  1. effectively transferring certain property to trustees and declaring the trusts on which the trustees are to hold such property, or

  2. declaring that certain property vested in them is to be held henceforth by them on trust

Effect of constitution of trust

The effect of constituting a trust is:

  1. irreversible by the settlor though voluntary, just as a gift once given is binding on the donor and cannot be revoked (unless the settlor has by the terms of the trust, specifically granted themselves or someone else an express power to revoke)

  2. to give beneficiaries enforceable rights in relation to the property (assuming a private non-purpose trust), whether or not they have provided any consideration. It is only the beneficiaries not the settlor, who can enforce the trust because the settlor retains no interest in the property (assuming they are not also a trustee or beneficiary)

  3. to give beneficiaries an equitable interest in the property

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