The nature of trusts and trust types
A trust is a way of holding property rights, where that property is managed by one person, (the trustee), for the benefit of another (the beneficiary). The trustee holds the legal title to the trust property but is required to do so for the benefit of one or more people, usually specified by the settler, who holds the equitable title.
There are a number of different types of trusts. The most commonly used is an express trust, which, to be valid, must meet the three certainties outlined in Knight v Knight (1840) by Lord Langdale MR. These are: certainty of intention to create a trust; certainty of the subject matter of the trust; and certainty of objects (ie, the intended beneficiaries of the trust).
Other common types of trusts in practice include:
- resulting trusts;
- constructive trusts;
- non-charitable purpose trusts;
- charitable trusts.
A resulting trust is one which is imposed by operation of law and returns the beneficial ownership in the trust property back to the settler. It aims to give effect to the common intention of the parties (Westdeutsche Landesbank Girozentrale v Islington LBC (1996)).
There are two kinds of resulting trusts. An automatic resulting trust comes to pass where the settlor conveys property to the intended trustee but the trust fails or part of the beneficial interest is not disposed of.
A presumed resulting trust is created by a presumption of intention that property purchased by A, but vested in B’s name, should be held by B on trust for A to the extent of his share in the purchase. The law presumes that A did not intend to make a gift of the property unless such an intention can be clearly shown. This presumption is rebuttable and in certain relationships (eg, between father and child), the presumption of advancement applies and it is presumed the gift was intended.
A constructive trust is another example of a trust which arises by operation of law and not through the express or implied intentions of the settler. It arises where a trustee holds property which, according to equity and good conscience, should be held or enjoyed by another. The court will give effect to the common intention between the parties where the claimant has acted to their detriment in relation to the disputed property. The common intention can be express (ie, there was express agreement that the property would be shared beneficially) or inferred from the conduct of the parties – usually only where a substantial contribution to the purchase price has been made (Lloyds Bank v Rosset (1991)).
Non-charitable purpose trust
A non-charitable purpose trust is one which does not have named beneficiaries, but instead is set up to advance some kind of non-charitable purpose. Usually such a trust would fail due to uncertainty of objects but the courts have held them to be valid in certain circumstances. These include trusts:
- to set up and maintain a monument or tomb (Re Hooper (1932));
- to care for the testator’s horses and hounds (Re Dean (1889));
- for the saying of masses (Bourne v Kean (1919));
- for the promotion of fox hunting (Re Thompson (1934).
Charitable purpose trust
For a trust to be a charitable purpose trust, its specified purpose must be for the public benefit and fall within one of the 13 descriptions of charitable purposes outlined in the Charities Act 2011. Those are trusts for:
- the prevention or relief of poverty;
- the advancement of education;
- the advancement of religion;
- the advancement of health or the saving of lives;
- the advancement of citizenship or community development;
- the advancement of the arts, culture, heritage or science;
- the advancement of amateur sport;
- the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity;
- the advancement of environmental protection or improvement;
- the relief of those in need, by reason of youth, age, ill-health, disability, financial hardship or other disadvantage;
- the advancement of animal welfare;
- the promotion of the efficiency of the armed forces of the Crown, or of the efficiency of the police, fire and rescue services or ambulance services;
- any other charitable purposes (this includes any charitable purpose not covered by the other descriptions of purposes and any new charitable purposes that may be recognised in the future as being similar to another charitable purpose).
A charitable purpose trust wi
ll generally receive tax breaks and afford more freedom to its trustees than that enjoyed by trustees of other types of English trust.