The 'three certainties'

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In order for a trust to exist three conditions must be satisfied, generally referred to as the "three certainties" (Knight v Knight (1840)).

'Certainty of Intention' it must be the intention of the settlor to create a trust, as opposed to a gift or power. Equity looks to substance, not form, and for this reason there must be a clear intention to (i) separate legal and equitable ownership of the property and (ii) impose the obligation of trusteeship on the holder of the legal title. In order to convey this intention within the trust instrument, the settlor must use imperatives rather than precatory words.

'Certainty of Subject Matter' the property subject to the trust needs to exist at time of the trust's creation, whether that property is in the form of land, goods, stock shares, money, debts, etc. Future property cannot be the subject of a trust. However, property not yet vested in the settlor (e.g. absolute entitlement to property that will vest when the settlor reaches a certain age) can be the subject of a trust.

'Certainty of Objects=' the nature of this requirement will vary depending on whether the trust is fixed or discretionary. A fixed trust specifies beneficiaries either by name or definite class. The extent of the benefit as well as the distribution scheme will also be specified, leaving no discretion to be exercised on the part of the trustee. With the exception of charitable trusts, the objects must be living human beings. This is a result of the beneficiary principle, which requires that the object be someone with locus standi, i.e. the legal capacity to apply to the court for enforcement of the trust.

For further discussion see Certainty of intention, Certainty of subject matter and Certainty of objects.

UK LAW