IFSP Trusts Foundation Certificate cheat sheet

A trust separates legal title (trustee) from beneficial/equitable title (beneficiary); the trustee holds assets for the beneficiary's benefit, not their own.

Three certainties must be satisfied for a valid express trust: certainty of intention (words imposing a binding obligation), certainty of subject matter (identifiable property), and certainty of objects (identifiable beneficiaries).

The beneficiary principle requires identifiable beneficiaries (or a valid charitable purpose); a trust for a non-charitable purpose with no ascertainable beneficiaries is generally void.

For fixed trusts, certainty of objects means a complete list of beneficiaries can be drawn (IRC v Broadway Cottages test); for discretionary trusts, the 'is or is not' test (McPhail v Doulton) applies - any given individual must be able to be identified as in or out of the class.

Formalities: a declaration of trust of land must be evidenced in writing and signed by the settlor (Law of Property Act 1925 s.53(1)(b)); a disposition of an equitable interest must be in writing signed by the transferor (s.53(1)(c)).

Constitution: a trust is incompletely constituted unless title to the trust property has vested in the trustees; equity will not assist a volunteer, and consideration is generally required to enforce a promise to settle.

The three certainties are assessed at the date of declaration; a trust failing certainty of subject matter (e.g., ambiguous identification of assets) is void, and the settlor retains the property.

Resulting trusts arise by operation of law where beneficial interest 'results back' to the settlor - typically where an express trust fails for uncertainty, or on voluntary contribution to property (presumption of resulting trust, rebuttable by presumption of advancement).

A constructive trust is imposed by law to prevent unconscionable conduct (e.g., breach of fiduciary duty, knowing receipt); it is not dependent on the parties' intentions.

Charitable trusts must satisfy the Charities Act definition: purposes that are charitable at law and for the public benefit; they enjoy exemption from the beneficiary principle and from the rule against perpetual duration.

The rule against perpetuities: for non-charitable trusts, the trust property must vest in interest within the perpetuity period (statutory 125 years in England & Wales under the Perpetuities and Accumulations Act 2009); charitable trusts are exempt.

Trustee duties: (1) duty of care and skill (statutory standard under Trustee Act 2000 s.1 - such care and skill as is reasonable in the circumstances, with special knowledge or experience expected of a professional trustee); (2) duty to act impartially between beneficiaries; (3) duty not to profit from the trust except as authorised.

Trustee powers: investment (Trustee Act 2000 s.3, subject to any restriction in the trust instrument), delegation (s.11), and power to acquire land (s.8); the investment power is subject to the standard investment criteria (s.4) - suitability and diversification.

Duty to review investments: trustees must review the trust's investments periodically (Trustee Act 2000 s.4(2)) and obtain and consider proper advice (s.5) unless it is unnecessary or inappropriate in the circumstances.

Fiduciary duty: no conflict of interest, no self-dealing (trustee cannot buy trust property), no secret profit; disclosure of any personal interest and, where authorised, informed consent of beneficiaries or the trust instrument is required.

Trustee liability: a trustee is liable for breach of trust; the court may relieve a trustee under Trustee Act 1925 s.61 if they acted honestly and reasonably and ought fairly to be excused.

Trustee exemption clauses: a trust instrument may exclude or restrict a trustee's liability for breach of trust, but cannot exclude liability for fraud or dishonest breach; professional trustees' exemption clauses are construed strictly.

Appointment and removal: trustees may be appointed under an express power, by statute (Trustee Act 1925 s.36), or by the court (s.41); a trustee may retire under s.39 with consent of co-trustees or the court.

Beneficiary rights: a beneficiary with a vested interest and full capacity can terminate the trust (Saunders v Vautier) and demand transfer of the trust fund; beneficiaries may also sue for breach of trust.

Trustee remuneration: a trustee is not entitled to remuneration unless authorised by the trust instrument, by statute (e.g., charging clauses), or by the court; a professional trustee may charge only where expressly permitted.

Record-keeping and accounts: trustees must keep proper accounts and records of trust property, produce them to beneficiaries on request, and be ready to account to the court.