Trusts: creation, types and administration
What the exam tests
The Trusts domain examines how an express trust is created and constituted, how trusts are classified, and the statutory and fiduciary rules that govern administration. Questions often combine validity with trustee powers, so a technically valid trust can still fail on administration.
Creation and constitution
A valid express trust needs the three certainties: intention (imperative words), subject matter (identifiable property), and objects (beneficiaries or charitable purposes). Certainty of objects is tested by list certainty for fixed trusts and by the "is or is not a member" test for discretionary trusts (McPhail v Doulton). The trust must also be constituted: either by transfer of assets to trustees (Milroy v Lord) or by a declaration of self as trustee. Re Rose applies where the donor has done everything necessary to transfer. Formalities matter: a declaration of trust over land must be evidenced in writing (s.53(1)(b) LPA 1925), and a disposition of an existing equitable interest must be in writing (s.53(1)(c)).
Types and administration
Distinguish bare trusts, fixed interest in possession, discretionary, accumulation, protective and charitable trusts. Trustees owe fiduciary duties and the statutory duty of care (s.1 Trustee Act 2000), with powers of investment (s.3), standard investment criteria (s.4), advice (s.5) and delegation (s.11). Appointment and retirement are governed by s.36 TA 1925 and the trust deed; disclosure to beneficiaries follows Schmidt v Rosewood.
Worked example
A settlor signs a deed declaring that she holds 10,000 shares in X Ltd on trust for her children. No transfer of the shares is needed because she is both settlor and trustee; the declaration itself constitutes the trust, provided the shares are identifiable and the objects certain. If instead she executed a transfer to a friend as trustee but never delivered the share certificate, the trust would generally be incompletely constituted and Milroy v Lord would prevent equity from perfecting it.
Traps
Do not confuse certainty of objects with certainty of intention; do not apply s.53(1)(b) to pure personalty; and do not assume a discretionary beneficiary has a proprietary interest in trust assets.