Introduction to trusts - Types of trusts: express, implied, ...

Learning Outcomes

This article outlines the core SQE1 trust law concepts and exam skills needed for accurate classification, analysis, and application, including:

• Distinction between express, implied (resulting and constructive), and charitable trusts, and recognition of each from typical fact patterns
• Criteria for correct trust classification in SQE1-style scenarios, with emphasis on spotting competing classifications and resolving borderline cases
• Application of the three certainties to express trusts, assessing intention, subject matter, and objects under time-pressured multiple-choice questions
• Formal writing requirements for declarations of trusts of land and dispositions of equitable interests, and identifying when s.53 LPA 1925 does not apply
• Operation of automatic and presumed resulting trusts in purchase-money and voluntary transfer situations, including the impact of the presumption of advancement
• Constructive trusts in family home disputes and breaches of fiduciary duty, with focus on common intention, detrimental reliance, and unconscionable conduct
• Key features of charitable trusts, including statutory charitable purposes, the public benefit requirement, and the need for exclusively charitable objects
• Advantages and limitations of charitable status, such as exemption from the rule against perpetuities, regulatory oversight, and restrictions on political purposes
• Operation of the cy-près doctrine to salvage failed or impracticable charitable gifts and redirect them to purposes ‘as near as possible’ to the settlor’s intention

SQE1 Syllabus

For SQE1, you are required to understand the different types of trusts and their legal characteristics, with a focus on the following syllabus points:

• the distinction between express and implied trusts (including resulting and constructive trusts)
• the requirements for creating an express trust (including the three certainties)
• the circumstances in which resulting and constructive trusts arise
• the special features and requirements of charitable trusts
• how to identify fixed and discretionary trusts and their practical implications
• the formalities for declarations of trusts of land (s.53(1)(b) Law of Property Act 1925) and dispositions of equitable interests (s.53(1)(c) LPA 1925), and the exception for implied, resulting and constructive trusts (s.53(2) LPA 1925)
• certainty of objects for fixed and discretionary trusts (complete list test and given postulant test), and the concepts of administrative unworkability and capriciousness
• how failed or partial trusts may trigger resulting trusts, and how failed charitable gifts can be redirected using the cy-près doctrine

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is a key requirement for a valid express trust?
   1. The trust must be for a charitable purpose
   2. The trust must arise by operation of law
   3. The settlor must demonstrate clear intention, subject matter, and objects
   4. The trust must be created by a court order
2. A person contributes to the purchase price of a property registered in another’s name, with no evidence of a gift. What type of trust is most likely to arise?
   1. Express trust
   2. Presumed resulting trust
   3. Charitable trust
   4. Purpose trust
3. Which of the following is NOT a requirement for a charitable trust?
   1. The purpose must be exclusively charitable
   2. The trust must benefit the public or a section of the public
   3. The trust must be for a private individual
   4. The purpose must fall within the statutory list of charitable purposes

Introduction

A trust is a legal arrangement where one party (the trustee) holds property for the benefit of another (the beneficiary). Trusts are central to English law and frequently examined in SQE1. You must be able to identify the different types of trusts, understand how each arises, and apply the correct classification to practical problems.

Trusts are classified by how they are created and their purpose. The main types are express trusts, implied trusts (including resulting and constructive trusts), and charitable trusts. It is critical to appreciate the split between legal and equitable title: trustees hold legal title and manage the property per the trust terms; beneficiaries hold the equitable (beneficial) interest and are entitled to the benefits of the trust. In co-ownership, a trust of land often arises automatically under statute, with trustees holding the legal estate on trust for the beneficial owners. The validity of an express trust requires the three certainties—intention, subject matter, and objects—and compliance with any applicable formalities.

Key Term: express trust
An express trust is deliberately created by the settlor or testator, who clearly indicates intention, property, and beneficiaries.

Key Term: implied trust
An implied trust arises automatically by law, not by express declaration.

Express Trusts

An express trust is created intentionally by the settlor (or testator, if by will). The settlor must make clear their intention to create a trust, specify the property to be held on trust, and identify the beneficiaries. These are known as the three certainties. Courts look to substance over form: words, conduct, and the overall context determine whether an imperative obligation was intended, rather than a mere hope or wish (precatory wording). If any of the certainties fail, the trust is invalid. Where the settlor intended to create a trust but has not disposed of all beneficial interests, or the trust cannot operate as intended, equity may impose a resulting trust.

Key Term: express trust
An express trust is deliberately created by the settlor or testator, who clearly indicates intention, property, and beneficiaries.

The trust property must be properly transferred to the trustees (constitution). For trusts of land, evidence in writing is required (s.53(1)(b) Law of Property Act 1925). For dispositions of an existing equitable interest (for example, where a beneficiary assigns their beneficial share to a third party), written and signed compliance is required (s.53(1)(c) LPA 1925). These writing requirements do not apply to implied, resulting or constructive trusts (s.53(2) LPA 1925), which arise by operation of law.

Three certainties in practice:

• Certainty of intention: mandatory language or conduct indicating a duty to hold for another. Precatory phrases such as “in the hope that…” or “trusting that…” typically do not suffice unless the overall instrument imposes an obligation.
• Certainty of subject matter: the property must be identifiable; and the beneficial shares must be sufficiently certain. Tangible items generally require segregation of the specific items intended to be held on trust, whereas identical intangible assets (e.g., shares of the same class) may not require segregation.
• Certainty of objects: beneficiaries must be ascertainable. For fixed trusts, trustees must be able to draw up a complete list of beneficiaries. For discretionary trusts, the “given postulant” test applies: it must be clear for any given individual whether they fall within the class.

Where the beneficiaries are adult and absolutely entitled, they may collectively bring a trust to an end by directing the trustees to transfer legal title (often referenced as the rule in Saunders v Vautier). This differs from a purely discretionary interest, where objects have only a right to be considered until appointed.

For assets other than land, the constitution steps differ (e.g., share transfers under the Stock Transfer Act 1963; delivery for chattels; payment or transfer for cash and choses in action). Equity will not perfect an imperfect gift, but there are limited exceptions, including where the donor has done everything necessary for transfer and only third-party action remains (commonly applied to share transfers and land), and strong factual scenarios such as a continuing intention coupled with appointment of the intended donee as personal representative (Strong v Bird–type reasoning).

Key Term: fixed trust
A fixed trust is an express trust where the settlor determines the beneficiaries and their precise entitlements.

Fixed Trusts

In a fixed trust, the settlor specifies exactly who the beneficiaries are and what share each receives. Trustees have no discretion in this regard. Certainty of objects in a fixed trust requires a complete list of beneficiaries; lack of evidence to identify all members of the class can render the trust void for uncertainty. Beneficial shares must be certain—if one beneficiary’s choice determines another’s entitlement, and that choice cannot occur, the trust may fail for uncertainty of beneficial interest.

Key Term: fixed trust
A fixed trust is an express trust where the settlor determines the beneficiaries and their precise entitlements.

Discretionary Trusts

In a discretionary trust, the settlor defines a class of potential beneficiaries and gives trustees discretion to decide who benefits and in what proportions. Certainty of objects applies via the “given postulant” test—trustees must be able to say with certainty whether any given individual is or is not within the class. Even if conceptually certain, a discretionary trust can fail if the class is so wide that the trust is administratively unworkable, or if the trust is capricious (no rational basis to guide distribution).

Key Term: discretionary trust
A discretionary trust is an express trust where trustees decide how to distribute income or capital among a defined class of beneficiaries.

Worked Example 1.1

A will leaves £100,000 "to be divided equally between my three children." What type of trust is this?

Answer:
This is a fixed trust. The beneficiaries (the three children) and their shares (one-third each) are specified.

Worked Example 1.2

A trust instrument states: "My trustees shall apply the income for such of my nieces and nephews as they think fit." What type of trust is this?

Answer:
This is a discretionary trust. The trustees have discretion over which nieces and nephews benefit and in what amounts.

Certainty of subject matter differs by asset type. For tangible property in bulk, segregation is required to identify trust goods. For identical intangible assets (e.g., fully paid, same-class company shares), segregation is typically unnecessary. In fixed trusts, evidence must allow a complete list of beneficiaries; in discretionary trusts, evidence must allow trustees to decide for each postulant whether they are within the class.

Worked Example 1.3

A settlor declares: “I hold 50 of my 950 ordinary shares in Energy plc on trust for A.” No specific share numbers are identified. Is there certainty of subject matter?

Answer:
Yes. Where identical intangible assets (same class of shares) are concerned and there are sufficient shares, segregation is not required. The trust over 50 shares is certain.

Conceptual certainty of class is required. Vague descriptors such as “friends” are generally conceptually uncertain for trusts, but a series of individual options can be valid as gifts subject to conditions precedent.

Worked Example 1.4

A will provides that “any of my friends may purchase a painting from my collection at a reduced price.” Is this valid?

Answer:
Yes. Framed as a series of individual options to purchase, it is valid. Each person must show they are a “friend” per the stated understanding; this is not a trust requiring a complete list.

Administrative workability can invalidate a discretionary trust if the class is hopelessly wide relative to the fund and purpose. The trustees must be able to survey and rationally select within the class.

Revision Tip

Evidence in writing is required to “manifest and prove” a declaration of trust of land, and a signed writing is required for a disposition of a subsisting equitable interest. These formalities do not apply to implied, resulting, or constructive trusts, which equity may impose without written evidence.

Implied Trusts

Implied trusts arise by operation of law, not by the express intention of the settlor. They are imposed to reflect presumed intentions or to prevent unfairness.

Key Term: implied trust
An implied trust is one that arises automatically by law, not by express declaration.

Key Term: resulting trust
A resulting trust arises when property returns to the settlor or provider of funds, either because an express trust fails or because of presumed intention.

Key Term: constructive trust
A constructive trust is imposed by law to prevent unconscionable conduct, regardless of the parties' intentions.

Resulting Trusts

Resulting trusts arise in two situations:

• Automatic resulting trusts: Where an express trust fails (e.g., for uncertainty or lack of beneficiaries) or does not dispose of the entire beneficial interest, the property "results" back to the settlor or their estate. This can occur where a life interest is given but remainder is not specified, or where a non-charitable purpose trust is invalid but funds remain.

• Presumed resulting trusts: Where a person transfers property to another for no consideration, or contributes to the purchase price of property held in another's name, equity presumes that the property is held on trust for the provider, unless there is evidence of a gift. The presumption applies to personalty and, subject to s.60(3) LPA 1925, may apply to land where facts support a resulting trust.

Key Term: presumed resulting trust
A presumed resulting trust arises when property is transferred for no consideration and the law presumes the transferor did not intend a gift.

Key Term: presumption of advancement
In certain relationships (historically, father-child or husband-wife), the law presumes a transfer was intended as a gift, rebutting the presumption of a resulting trust. (Note: This presumption is abolished by s.199 Equality Act 2010, but that section is not yet in force.)

When a person pays all or part of the purchase price for property vested in another’s name, the presumption is that the legal owner holds on resulting trust in proportion to contributions (unless a gift or advancement is shown). In cohabitation contexts, courts may instead assess beneficial ownership under constructive trust principles (especially where both parties are on title or evidence of shared intentions exists), but purchase-money contributions can still evidence a resulting trust in appropriate cases.

Worked Example 1.5

Sam pays £80,000 towards the purchase of a house registered in his partner's sole name. There is no evidence of a gift. What is the likely outcome?

Answer:
A presumed resulting trust arises. Sam is likely entitled to a share of the property proportionate to his contribution.

Worked Example 1.6

A father buys a flat and places it in his adult child’s sole name, paying the entire price. There is no documentation of intention. What presumption applies?

Answer:
The presumption of advancement in the father–child relationship points to a gift, rebutting the presumption of a resulting trust. The adult child likely takes beneficially unless contrary evidence is shown. The statutory abolition in s.199 Equality Act 2010 is not in force.

Automatic resulting trusts also arise on failure of beneficiaries, void trusts against public policy, or surplus funds after a trust purpose is completed. Whether surplus funds fall back on resulting trust or are treated as an outright gift depends on construction of the instrument.

Constructive Trusts

Constructive trusts are imposed by the court to prevent unjust enrichment or unconscionable outcomes. They frequently arise in two broad settings:

• Breach of fiduciary duty and property acquired or retained in breach: A trustee or fiduciary who makes unauthorised profits, misuses trust assets, or takes advantage of their position may be compelled to hold gains on constructive trust for beneficiaries.

• Family home/common intention cases: Where parties had a common intention (express or inferred) that one should have a share in property and that person acted to their detriment in reliance, equity may impose a constructive trust to recognise their beneficial interest. Intention may be evidenced by discussions, excuses for sole legal title, or indirect contributions, and detriment may include substantial non-financial labour or financial contributions outside purchase price.

Constructive trusts also underpin liability of third parties (e.g., knowing receipt, dishonest assistance) by imposing obligations to restore value, but the focus here is on proprietary constructive trusts used to recognise or protect equitable ownership.

Worked Example 1.7

A and B buy a house in B's name. They agree orally that A will have a share, and A pays for renovations. Later, B denies A's interest. What is the likely result?

Answer:
The court may impose a constructive trust in A's favour, as there was a common intention and detrimental reliance.

Worked Example 1.8

An unmarried couple live together. The man holds legal title, explaining it would be “joint but for your age” and asking the woman to undertake heavy renovations. She makes no direct purchase price contribution. What outcome is likely?

Answer:
A court may infer common intention and find detriment from substantial labour, awarding a beneficial share under a constructive trust. The precise share depends on the whole course of dealings.

Rev​ision Tip

For family home disputes, consider whether a purchase-money resulting trust applies or whether the facts better support a common intention constructive trust. For third-party wrongdoing, focus on whether the recipient had knowledge or assisted dishonestly; those are separate accessory liabilities often discussed under the heading of constructive trust but operate differently.

Charitable Trusts

Charitable trusts are a special category of express trust. They are created for purposes recognised as charitable by law, not for private individuals. They benefit the public or a sufficient section of the public and enjoy distinctive legal advantages.

Key Term: charitable trust
A charitable trust is a trust established for a purpose recognised as charitable by law, which must benefit the public or a sufficient section of the public.

To be valid, a charitable trust must satisfy three requirements:

1. Charitable purpose: The purpose must fall within the statutory list (Charities Act 2011, s.3), which includes prevention or relief of poverty; advancement of education; advancement of religion (including non-theistic beliefs); advancement of health or the saving of lives; advancement of citizenship or community development; advancement of the arts, culture, heritage or science; advancement of amateur sport; advancement of human rights, conflict resolution or reconciliation, or promotion of religious or racial or equality and diversity; advancement of environmental protection or improvement; relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage; advancement of animal welfare; promotion of the efficiency of the armed forces, police, fire and rescue services or ambulance services; and other purposes analogous to recognised charitable purposes.

2. Public benefit: The trust must benefit the public or a sufficient section of the public. A “personal nexus” (e.g., limited to employees of a specific employer) will usually defeat public benefit except in certain poverty relief cases. The benefit must be identifiable and not outweighed by detriment.

3. Exclusively charitable: All stated purposes must be charitable; mixed charitable and non-charitable purposes are invalid, though ancillary political activities furthering the charitable aim may be permissible.

Charitable trusts are exempt from the rule against perpetuities and may be perpetual. They are overseen by the Charity Commission and enforced by the Attorney General rather than individual beneficiaries. Where a charitable purpose fails or becomes impossible or impracticable, the cy-près doctrine enables the court or Commission to redirect property to a similar charitable purpose “as near as possible” to the original.

Worked Example 1.9

A trust is set up "for the advancement of education for children in London." Is this a charitable trust?

Answer:
Yes, provided the trust is exclusively for educational purposes and benefits a sufficient section of the public.

Public benefit requires an adequate class and an identifiable benefit. A class tied by a personal nexus such as employment usually fails, whereas relief of poverty may permit narrower classes (e.g., the poor among a family or group). Purely political purposes (e.g., campaigning to change the law) are not charitable, but political activity ancillary to achieving a charitable purpose can be acceptable.

Worked Example 1.10

A trust provides scholarships “for children of employees and ex-employees of X Ltd.” Charitable?

Answer:
Likely not. The personal nexus through employment defeats public benefit, even if the group is numerous.

Worked Example 1.11

A trust provides “income to relieve poverty among my relatives.” Charitable?

Answer:
Yes. Relief of poverty can be charitable even if the class is defined by a personal nexus such as family ties.

Cy-près preserves charitable intention by redirecting failed gifts. If a named charity ceases to exist or a purpose becomes impracticable, the court may approve application of funds to similar charitable ends.

Worked Example 1.12

A testator leaves funds to a local charity that later dissolves. Can the gift still be used for charity?

Answer:
Yes. If a general charitable intention is found, funds can be applied cy-près to similar charitable purposes.

Exam Warning

Do not confuse a charitable trust (which must benefit the public) with a non-charitable purpose trust (e.g., for the maintenance of a specific animal or tomb), which is generally invalid unless it falls within a narrow exception. Non-charitable purpose trusts must also comply with the rule limiting duration (rule against inalienability).

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• Trusts involve a split between legal and equitable ownership.
• Express trusts require clear intention, subject matter, and objects; precatory words usually do not suffice.
• For trusts of land, declarations must be evidenced in writing (s.53(1)(b) LPA 1925); dispositions of subsisting equitable interests must be in writing and signed (s.53(1)(c) LPA 1925).
• Fixed trusts specify beneficiaries and shares; discretionary trusts give trustees power to choose. Certainty of objects tests differ accordingly.
• Tangible bulk property typically requires segregation to achieve certainty; identical intangible assets usually do not.
• Implied trusts arise by law, not by express declaration, and are exempt from the LPA writing formalities (s.53(2)).
• Resulting trusts return property to the settlor or provider of funds; presumed resulting trusts often apply in purchase-money and voluntary transfer scenarios, subject to the presumption of advancement.
• Constructive trusts are imposed to prevent unconscionable conduct; common intention plus detrimental reliance can give rise to family home constructive trusts.
• Charitable trusts must have a charitable purpose, benefit the public, and be exclusively charitable; they are exempt from perpetuity rules, overseen by the Charity Commission, and can be redirected cy-près if a purpose fails.
• The cy-près doctrine applies to failed charitable gifts to achieve purposes “as near as possible” to the original intention.

Key Terms and Concepts

• express trust
• fixed trust
• discretionary trust
• implied trust
• resulting trust
• presumed resulting trust
• presumption of advancement
• constructive trust
• charitable trust