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Trust Law/Level I · The idea of a trust/1.3 How trusts arise/Lesson 1

Express trusts: made on purpose

How a trust is created deliberately, by declaring it or by transferring property to a trustee

Education, not legal advice. Trust law changes from country to country and state to state, and the right structure depends on your situation. Anything you sign should be drafted or reviewed by a qualified lawyer where you live.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. A self-declaration over personal property costs nothing, since no transfer or form is needed; proof is the catch, as an oral trust must be shown by clear and convincing evidence (UTC §407), so sign a short written note.
  2. Land needs signed writing: in England and Wales a declaration of trust over land must be evidenced in writing (Law of Property Act 1925 s.53(1)(b)), and US Statutes of Frauds are similar; without it the trust cannot be enforced.
  3. UK resident express trusts, even untaxed ones, must register on HMRC’s Trust Registration Service within 90 days of creation unless excluded under Schedule 3A of the Money Laundering Regulations 2017; check the exclusions before assuming either way.
  4. Often the simplest express arrangement is no trust: payable-on-death and transfer-on-death designations send named assets to named people outside probate at no cost; they give no management for minors or anyone who becomes incapacitated.
  5. For charity, giving to an existing charity or a donor-advised fund avoids creating a charitable trust supervised by the Attorney General; a separate charitable trust pays off only for large, long-term purposes.

MaterialsA sample declaration of trust documentThe writing requirements section of your state’s Statute of Frauds or England’s Law of Property Act 1925A list of potential beneficiaries and trustees

Wonder

  1. Does a trust have to be written down to be valid?
  2. What happens if the trustee is also the beneficiary?
  3. How does a charitable trust differ from a private one?

Explore

  1. An express trust is a trust someone creates on purpose. The person creating it, the settlor, either declares that they now hold their own property on trust, or transfers property to someone else, the trustee, to hold for the beneficiaries. This contrasts with resulting and constructive trusts, which the law presumes or imposes without anyone choosing to create them. The settlor must show a real intention to create a trust; without it, a court will not find an express trust, however the property happens to be held.
  2. For most property no special form is needed, and an express trust can even be made by spoken words. Land is different. In England and Wales, section 53(1)(b) of the Law of Property Act 1925 requires a declaration of trust over land to be shown and proved by signed writing; without it, the trust cannot be enforced. In the US, each state’s Statute of Frauds typically requires similar writing for trusts of land. The Uniform Trust Code (§407) allows oral trusts where no statute requires writing, but they must be proved by clear and convincing evidence.
  3. There are two ways to make an express trust. In a self-declaration, the settlor declares that they now hold their own property on trust; nothing changes hands, and the settlor keeps legal title but now holds it as trustee. In a transfer, the settlor gives legal title to a separate trustee, using whatever steps that kind of property requires, such as a deed for land or a registered share transfer. English courts will not rescue a transfer that was never completed by treating it as a declaration instead (Milroy v Lord, 1862).
  4. No particular words are required. In Paul v Constance (1977), the English Court of Appeal found an express trust where a man had told his partner, more than once, that money in a bank account in his sole name was ‘as much yours as mine’. His words and conduct showed an intention that she share the money, even though he never used the word ‘trust’. Courts look for three certainties, of intention, subject matter and objects, set out in Knight v Knight (1840); lesson 1.3.4 covers them.
  5. Express trusts are either private or charitable. A private trust benefits particular people, such as family members, and needs identifiable beneficiaries who can enforce it. A charitable trust serves a purpose that benefits the public, such as relieving poverty or advancing education. Because it has no individual beneficiaries, it is enforced by a public official: the Attorney General in US states and in England and Wales, where the Charity Commission also regulates charities. Charitable trusts can last indefinitely, unlike most private trusts, and often receive tax advantages.
  6. One person can hold more than one role. A settlor can be the trustee, as in a self-declaration, and a trustee can also be one of several beneficiaries. In the US, many revocable living trusts name the same person as settlor, trustee and lifetime beneficiary, with others named to benefit after death. What fails is complete overlap: if the sole trustee is also the sole beneficiary of all present and future interests, legal and beneficial title merge and the trust ends, because no one else holds a right against the trustee.

Key facts

  • England and Wales: a declaration of trust over land must be shown and proved by signed writing (Law of Property Act 1925 s.53(1)(b)), or it cannot be enforced.
  • A settlor can declare a self-trust or transfer assets to an independent trustee.
  • Knight v Knight (1840) requires certainty of intention, subject matter, and objects.
  • If the sole trustee is also the sole beneficiary of all present and future interests, legal and beneficial title merge and the trust ends.
  • Charitable trusts serve public purposes, are enforced by a public official such as the Attorney General, and can last indefinitely.
  • In the US, state Statutes of Frauds typically require writing for trusts of land; under the Uniform Trust Code (§407), an oral trust must be proved by clear and convincing evidence.

Exercise nine, six, three, one

9CollectGather 9 examples of assets you might place into a trust (e.g., house, bank account, car) and note which would require written documentation under your local laws.
6ClusterSort the 9 assets into 6 categories by type, such as land, buildings, bank deposits, shares, vehicles and personal belongings, noting the writing rules for each.
3DistillReduce the 6 categories to 3 core groups: those requiring strict written transfer, those allowing oral declarations, and those with complex registration processes.
1CrystallizeWrite 1 sentence explaining why the method of creation (declaration vs. transfer) depends on whether you are keeping or giving up legal title.

Fact check

Dates, figures and claims checked against the published sources listed below.

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