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

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Overview

Trusts play a vital role in English property law, significantly impacting asset management, wealth distribution, and charitable efforts. For those preparing for the SQE1 FLK2 exam, understanding the various types of trusts is vital. This article delves into express, implied, resulting, constructive, and charitable trusts, focusing on their legal principles, key cases, and practical applications.

Express Trusts

Express trusts are intentionally created by settlors and are central to trust law. They require clear evidence of intention and must comply with specific legal formalities.

Key Concepts

  • Creation: Needs a clear expression of intent to create a trust, along with compliance with necessary formalities.
  • Three Certainties: As established in Knight v Knight (1840), express trusts must satisfy:
    1. Certainty of intention
    2. Certainty of subject matter
    3. Certainty of objects
  • Formalities: For trusts of land, the Law of Property Act 1925, section 53(1)(b) requires the trust to be evidenced in signed writing.

Types of Express Trusts

  1. Fixed trusts: Beneficiaries' interests are explicitly defined.
  2. Discretionary trusts: Trustees have discretion in distributing benefits.
  3. Protective trusts: Designed to shield beneficiaries from creditors or their own imprudence.

Example

A testator leaves £500,000 in their will "to my trustees to hold on trust for my children in equal shares when they reach 25 years of age." This creates an express fixed trust, satisfying all three certainties:

  • Intention: Clear directive to trustees
  • Subject matter: £500,000
  • Objects: The testator's children

Implied Trusts

Implied trusts arise through law, often where fairness necessitates acknowledging equitable interests despite the absence of express creation.

Key Concepts

  • Types: Include resulting trusts and constructive trusts.
  • Legal Basis: These trusts don't require written evidence per LPA 1925, section 53(2).

Resulting Trusts

Resulting trusts occur when an express trust fails or is incomplete, or when property is transferred without full consideration.

Key Concepts

  • Automatic Resulting Trusts: Occur when an express trust fails to dispose of the entire beneficial interest.
  • Presumed Resulting Trusts: Based on a presumption of the transferor's intention to retain an interest.
  • Purchase Price Resulting Trusts: When one party contributes to the purchase price of property held in another's name.

Example

Alice contributes £60,000 towards a £200,000 house purchased in Bob's name. In the absence of contrary evidence, Alice would be presumed to have a 30% beneficial interest under a resulting trust.

Case Law

Vandervell v IRC [1967] 2 AC 291 established the occurrence of resulting trusts where there is a gap in the beneficial interest.

Constructive Trusts

Constructive trusts are imposed by courts to prevent unfair enrichment and rectify situations where someone holds property that rightfully belongs to another.

Key Concepts

  • Common Intention Constructive Trusts: Arise in family home disputes where both parties intend to share a beneficial interest.
  • Institutional Constructive Trusts: Arise automatically in situations like breach of fiduciary duty.

Case Law

  • Stack v Dowden [2007] UKHL 17: Presumed joint beneficial ownership in joint legal ownership cases.
  • Lloyds Bank v Rosset [1991] 1 AC 107: Outlined principles for establishing common intention constructive trusts.

Charitable Trusts

Charitable trusts serve purposes that benefit the public and enjoy special legal protections and tax exemptions.

Key Concepts

  • Legal Framework: Governed by the Charities Act 2011.
  • Requirements: Must be exclusively charitable purposes, fall within statutory list, and benefit the public.
  • Charitable Purposes: Include prevention of poverty, advancement of education, promotion of health, etc.

Case Law

R (Independent Schools Council) v Charity Commission [2012] UKUT 214 (TCC) provided essential guidance on interpreting the public benefit requirement.

Conclusion

Thorough knowledge of express, implied, resulting, constructive, and charitable trusts is vital for success in the SQE1 FLK2 exam and future legal practice. These trusts underpin property management, family wealth distribution, and philanthropic efforts in English law. Candidates should focus on:

  1. Identifying the key elements and legal requirements for each trust type
  2. Analyzing scenarios to determine applicable trust types
  3. Applying case law to novel situations
  4. Understanding the interplay between different trust types and property law

By mastering these concepts, aspiring solicitors will be well-prepared to tackle the complexities of trust law in both examinations and professional settings.