Capacity, formality and testamentary trusts

Capacity

Issues that can arise when a settler tries to create a trust: Mental incapacity (Simpson v Simpson [1992] 1 FLR 601), The age of the person attempting to create the trust

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Issue with age

A person under the age of 18 cannot create a trust of land (s.1(6) Law of Property Act 1925) and, after their 18th birthday, can renounce any trust of their personal property that they created while still a minor (Edwards v Carter [1893] AC 360)

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Formality requirements for creating an
inter vivos trust

Trusts of personal property can be declared effectively through an express
oral statement

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Formality requirements for creating an
inter vivos trust 2

A “declaration” of a trust of land must be “manifested and proved by some writing signed by some person who is able to declare such trust”
(s.53(1)(b) Law of Property Act 1925)

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Formality requirements for creating an
inter vivos trust 3

The earlier rule does not apply to
the creation or operation of resulting and constructive trusts (s.53(2) Law of Property Act 1925)

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testamentary trust

a trust that will come into effect upon the death of
the person attempting to create the trust

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the testator

The is the person intending to create the testamentary and they will have expressed their intentions in their will

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A will

a document in which a testator appoints “an executor” to administer the testator’s estate on the testator’s death

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Section 9, Wills Act 1837

No will shall be valid, unless –

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a

it is in writing, and signed by the testator, or by some other person in his presence and by his
direction; and

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b

it appears that the testator intended by his signature to give effect to the will; and

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c

the signature is made or acknowledged by the testator in the presence of two or more witnesses
present at the same time; and

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d

each witness either –
(i) attests and signs the will; or
(ii) acknowledges his signature, in the presence of the testator (but not necessarily in the presence of
any other witness), but no form of attestation shall be necessary

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The formality requirements in the Wills
Act 1837

Failure to comply with the formality requirements when seeking to create a testamentary trust usually means that the attempt to create a trust is ineffective. However, secret trusts are an exception to this

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secret trusts

A secret trust can arise when a testator (T) states in their will that they are leaving property for A but T separately informs A that A is to hold this property on trust for B

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distinction between a half secret trust and a fully secret trust

half secret-T states in that they are leaving property for A to hold on trust for another person but doesn't refer to the intended beneficiary in their will. fully secret trust-T doesn't refer to the requirement that A should hold the property for another

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Case

Ottaway v Norman [1972] Ch 698

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The theoretical problem with secret
trusts

In Ottaway v Norman, T s created a trust in favour of Ottaway despite T’s failure to refer to the creation of this trust in his will. This appears to have breached s.9 of the Wills Act 1837 and s.53(1)(b) of the Law of Property Act 1925

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Why was Brightman J prepared to conclude that an effective trust had been created? 1

“[T]he whole theory of secret trusts is that the Wills Act has nothing to do with the matter” because a secret trust is really a type of inter vivos trust (per Danckwerts J in Re Young [1951] Ch 344 at 350).

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Why was Brightman J prepared to conclude that an effective trust had been created? 2

TThe trustee in a secret trust should not be able to profit by acting fraudulently – in Ottaway v
Norman this meant that the failure to use writing to manifest and prove the existence of the trust of
land did not matter

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Why was Brightman J prepared to conclude that an effective trust had been created? 3

– this was a constructive trust, not an express trust so no written declaration of
trust was required (s.53(2) Law of Property Act 1925)

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Why would a testator want to create a
secret trust?

A will is a public document and T might have wanted to leave their property to a person with whom they have had an affair, or to children
they had with a person with whom they had an affair. Rawstron v Freud [2014]

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Remember that...

An attempt to create a valid fully secret trust or a valid half secret trust must satisfy the three certainties (intention, subject
matter and objects)

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Blackwell and Blackwell

the terms are communicated to trustee before the will is made

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Re Keen

envelope opened after death

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Moss r Cooper

acceptance/silence

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Get Revising

Capacity, formality and testamentary trusts

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