How to create an express trust: the basics

Distinguishing express trusts from other types of trusts

There are many forms of trusts that can arise in a number of ways. To establish what sort of trust you have or intend to create, the distinction between the available trusts first needs to be made.

Trusts are capable of arising in several different ways, including:

  • A declaration may be made by a property owner that (s)he or some other person will hold the property on trust for specified beneficiaries or for some designated purpose. A trust arising in this manner is called an express trust.
  • Where a property owner transfers such property to another person not intending the recipient to enjoy the benefit of the property but fails to specify who is to take the benefit or the intended beneficiary cannot be identified, equity will normally make the recipient hold the property on trust for the person who originally transferred the property. Such a trust is called a resulting trust.

    For example, Angela pays £10,000 into Bert’s bank account but gives no indication that this is intended as a gift. Unless Bert is Angela’s wife/child, Bert will ordinarily hold it on resulting trust for Angela.

  • In certain situations, it is considered inequitable for a legal owner of property to lay claim to the property exclusively for their own benefit. One mechanism devised by equity for dealing with such situations is to impose a constructive trust. The constructive trust comes into operation in a variety of contexts in which the courts deem it necessary to compel a person to hold property for the benefit of another in the interests of justice and good conscience. Examples of where a constructive trust could possibly be imposed include:
    • where a beneficiary under a will unlawfully kills the testator (creator of the will) and inherits their property;
    • where the legal title to the family home is in the name of one partner but there is a common intention that the other partner will have a share in the property and that other party has relied on this to their detriment.

The law also imposes a trust in a variety of circumstances specified by Acts of Parliament. A good example of such a statutory trust is found in the Administration of Estates Act 1925 (AEA 1925), which deals with the estates of persons dying intestate, ie, without a valid will or whose wills do not dispose of the entire estate. AEA 1925 provides for the appointment of an administrator who will be responsible for distributing the estate among the deceased’s next-of-kin. Under s 33 of AEA 1925, pending the distribution of the estate, the administrator holds it on trust with a power of sale and conversion into money.

The basic requirements for the creation of express trusts

Three requirements must be fulfilled for the creation of a correctly formed express trust, these are:

  • The ‘three certainties’ must be present for an express trust to be validly declared, as outlined by Lord Langdale MR in Knight v Knight (1840). These are: certainty of intention (there must be intention to create a trust), certainty of subject matter (the assets which are to form part of the trust fund must be readily recognisable) and certainty of objects (the beneficiaries of the trust to whom the trustees owe a duty must be readily identifiable).
  • The correct statutory formalities must be followed where the trust being declared relates to certain types of property (land or personalty); or where a beneficiary under a trust seeks to dispose of their beneficial interest in the trust property.
  • The trust must be properly constituted. For a trust to be enforceable, the trust property must be duly vested in the intended trustee.