Introduction to trusts - Types of trusts: express, implied, resulting, constructive, and charitable

Learning Outcomes

After reading this article, you will be able to distinguish between the main types of trusts in English law: express, implied (including resulting and constructive), and charitable trusts. You will understand how each type arises, their defining features, and their practical significance. This knowledge will enable you to identify and apply the correct trust classification in SQE1-style scenarios.

SQE1 Syllabus

For SQE1, you are required to understand the different types of trusts and their legal characteristics. In your revision, focus on:

• the distinction between express and implied trusts (including resulting and constructive trusts)
• the requirements for creating an express trust (including the three certainties)
• the circumstances in which resulting and constructive trusts arise
• the special features and requirements of charitable trusts
• how to identify fixed and discretionary trusts and their practical implications

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is a key requirement for a valid express trust?
   1. The trust must be for a charitable purpose
   2. The trust must arise by operation of law
   3. The settlor must demonstrate clear intention, subject matter, and objects
   4. The trust must be created by a court order
2. A person contributes to the purchase price of a property registered in another’s name, with no evidence of a gift. What type of trust is most likely to arise?
   1. Express trust
   2. Presumed resulting trust
   3. Charitable trust
   4. Purpose trust
3. Which of the following is NOT a requirement for a charitable trust?
   1. The purpose must be exclusively charitable
   2. The trust must benefit the public or a section of the public
   3. The trust must be for a private individual
   4. The purpose must fall within the statutory list of charitable purposes

Introduction

A trust is a legal arrangement where one party (the trustee) holds property for the benefit of another (the beneficiary). Trusts are central to English law and frequently examined in SQE1. You must be able to identify the different types of trusts, understand how each arises, and apply the correct classification to practical problems.

Trusts are classified by how they are created and their purpose. The main types are express trusts, implied trusts (including resulting and constructive trusts), and charitable trusts.

Express Trusts

An express trust is created intentionally by the settlor (or testator, if by will). The settlor must make clear their intention to create a trust, specify the property to be held on trust, and identify the beneficiaries. These are known as the three certainties.

Key Term: express trust An express trust is deliberately created by the settlor or testator, who clearly indicates intention, property, and beneficiaries. The trust property must be properly transferred to the trustees (constitution). For trusts of land, evidence in writing is required (s.53(1)(b) Law of Property Act 1925).

Express trusts are further divided by the degree of control given to trustees over the distribution of benefits.

Fixed Trusts

In a fixed trust, the settlor specifies exactly who the beneficiaries are and what share each receives. Trustees have no discretion in this regard.

Key Term: fixed trust A fixed trust is an express trust where the settlor determines the beneficiaries and their precise entitlements.

Discretionary Trusts

In a discretionary trust, the settlor defines a class of potential beneficiaries and gives trustees discretion to decide who benefits and in what proportions.

Key Term: discretionary trust A discretionary trust is an express trust where trustees decide how to distribute income or capital among a defined class of beneficiaries.

Worked Example 1.1

A will leaves £100,000 "to be divided equally between my three children." What type of trust is this?

Answer: This is a fixed trust. The beneficiaries (the three children) and their shares (one-third each) are specified.

Worked Example 1.2

A trust instrument states: "My trustees shall apply the income for such of my nieces and nephews as they think fit." What type of trust is this?

Answer: This is a discretionary trust. The trustees have discretion over which nieces and nephews benefit and in what amounts.

Implied Trusts

Implied trusts arise by operation of law, not by the express intention of the settlor. They are imposed to reflect presumed intentions or to prevent unfairness.

Key Term: implied trust An implied trust is one that arises automatically by law, not by express declaration.

Key Term: resulting trust A resulting trust arises when property returns to the settlor or provider of funds, either because an express trust fails or because of presumed intention.

Key Term: constructive trust A constructive trust is imposed by law to prevent unconscionable conduct, regardless of the parties' intentions.

Resulting Trusts

Resulting trusts arise in two situations:

• Automatic resulting trusts: Where an express trust fails (e.g., for uncertainty or lack of beneficiaries) or does not dispose of the entire beneficial interest, the property "results" back to the settlor or their estate.
• Presumed resulting trusts: Where a person transfers property to another for no consideration, or contributes to the purchase price of property held in another's name, equity presumes that the property is held on trust for the provider, unless there is evidence of a gift.

Key Term: presumed resulting trust A presumed resulting trust arises when property is transferred for no consideration and the law presumes the transferor did not intend a gift.

Key Term: presumption of advancement In certain relationships (historically, father-child or husband-wife), the law presumes a transfer was intended as a gift, rebutting the presumption of a resulting trust. (Note: This presumption is abolished by s.199 Equality Act 2010, but that section is not yet in force.)

Worked Example 1.3

Sam pays £80,000 towards the purchase of a house registered in his partner's sole name. There is no evidence of a gift. What is the likely outcome?

Answer: A presumed resulting trust arises. Sam is likely entitled to a share of the property proportionate to his contribution.

Constructive Trusts

Constructive trusts are imposed by the court to prevent unjust enrichment or fraud. They often arise where someone acquires property through breach of fiduciary duty, or where there is a common intention that another should have a share in property and that person has acted to their detriment in reliance.

Worked Example 1.4

A and B buy a house in B's name. They agree orally that A will have a share, and A pays for renovations. Later, B denies A's interest. What is the likely result?

Answer: The court may impose a constructive trust in A's favour, as there was a common intention and detrimental reliance.

Revision Tip

For SQE1, focus on when resulting and constructive trusts arise, and be able to distinguish them from express trusts.

Charitable Trusts

Charitable trusts are a special category of express trust. They are created for purposes recognised as charitable by law, not for private individuals.

Key Term: charitable trust A charitable trust is a trust established for a purpose recognised as charitable by law, which must benefit the public or a sufficient section of the public.

To be valid, a charitable trust must satisfy three requirements:

1. Charitable purpose: The purpose must fall within the statutory list (e.g., relief of poverty, advancement of education, religion, health, animal welfare).
2. Public benefit: The trust must benefit the public or a sufficient section of the public.
3. Exclusively charitable: The trust's purposes must be entirely charitable. Trusts with mixed charitable and non-charitable purposes are invalid.

Charitable trusts are exempt from the rule against perpetuities and are regulated by the Charity Commission. They are enforced by the Attorney General, not by private beneficiaries.

Worked Example 1.5

A trust is set up "for the advancement of education for children in London." Is this a charitable trust?

Answer: Yes, provided the trust is exclusively for educational purposes and benefits a sufficient section of the public.

Exam Warning

Do not confuse a charitable trust (which must benefit the public) with a non-charitable purpose trust (e.g., for the maintenance of a specific animal or tomb), which is generally invalid unless it falls within a narrow exception.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• Trusts involve a split between legal and equitable ownership.
• Express trusts require clear intention, subject matter, and objects.
• Fixed trusts specify beneficiaries and shares; discretionary trusts give trustees power to choose.
• Implied trusts arise by law, not by express declaration.
• Resulting trusts return property to the settlor or provider of funds.
• Constructive trusts are imposed to prevent unconscionable conduct.
• Charitable trusts must have a charitable purpose, benefit the public, and be exclusively charitable.
• Charitable trusts are exempt from perpetuity rules and are regulated differently from private trusts.

Key Terms and Concepts

• express trust
• fixed trust
• discretionary trust
• implied trust
• resulting trust
• presumed resulting trust
• presumption of advancement
• constructive trust
• charitable trust