Constitution of trusts

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Constitution refers to the transfer of legal title. When property is disposed of upon death, a valid will constitutes the trust and legal title vests in the trustees. When making a lifetime disposition, Turner LJ in Milroy v Lord set out three ways of transferring property:

  • Outright transfer of gift
  • Declaration of trust with separate trustee to hold property for beneficiary
  • Self-declaration of trust to hold property for beneficiary

It is important that the correct method is used for transferring legal title. For an outright gift of a chattel, this is simply intention and delivery, such as when I give you a birthday present and say 'here, this is for you'. A trust of land, however, must be evidenced in signed writing in accordance with section 53(1)(b) of the LPA 1925. A disposition of an existing equitable interest must be made in writing signed by the person disposing the same (section 53(1)(c) of the LPA 1925).

Where the correct method of transferring legal title has not been used, equity will not perfect an imperfect gift, nor will it assist a volunteer, nor treat a failed gift or transfer as a self-declaration of trust (Milroy v Lord). However, there are some exceptions to this:

  • Where the settlor has done everything in his power
  • Valid death-bed gift
  • Proprietary estoppel
  • The rule in Strong v Bird
  • Where there is an effective self-declaration of trust as one of several intended trustees
    Trust Law