Learning Outcomes
This article explains the essential principles that govern the valid creation of express trusts for the SQE2. By the end, you will be able to identify and apply the three certainties, distinguish formality requirements for trusts of land and personalty, and explain the importance of constitution. You will also recognise what constitutes an incompletely constituted trust and the consequences for beneficiaries.
SQE2 Syllabus
For SQE2, you are required to understand the creation and requirements of express trusts from a practical standpoint. Ensure you review these points during your revision:
- The meaning and application of the three certainties: intention, subject matter, and objects
- Formality requirements for creating inter vivos trusts of land and personalty
- Formalities for declarations of trust in wills
- Formalities for the disposition of a subsisting equitable interest
- The rule on constitution: what is required to fully vest the trust property in the trustees
- Consequences of non-compliance, including unenforceable and void trusts
- Rights and limitations of volunteers, beneficiaries, and trustees where constitution or formalities fail
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.
- Do all trusts require written evidence to be valid? Explain your answer.
- Describe the three certainties required for the valid creation of an express trust.
- When does a trust of land fail for lack of formality, and what is the legal effect?
- What is the difference between a vested interest and a contingent interest in trust law?
- Who is a “volunteer” and what are their rights if a trust is not properly constituted?
Introduction
An express trust is formed when a person intentionally declares or creates an arrangement to hold property for the benefit of others or for a defined purpose. For a trust to be valid and enforceable, specific requirements must be satisfied. The SQE2 assessment demands not just knowledge of the technical requirements, but also an ability to apply these in client scenarios to provide clear legal advice. This article covers the core principles that underpin the creation of express trusts: the three certainties, mandatory formality rules, and the essential step of constitution.
The Three Certainties
A valid express trust is not formed by accident. The law requires three certainties to be satisfied:
Key Term: Three certainties
In trust law, three requirements that must all be present: certainty of intention, certainty of subject matter, and certainty of objects (beneficiaries).
- Certainty of Intention: The settlor must make clear—by language, conduct, or both—a real intention to create a trust and not some other arrangement.
- Certainty of Subject Matter: The trust property (assets) must be clearly identified or identifiable.
- Certainty of Objects: The beneficiaries (or, for purpose trusts, the purpose) must be sufficiently certain.
If any certainty is missing, the trust will fail.
Key Term: Settlor
The person who creates or declares a trust by transferring property or declaring a trust over it.
Certainty of Intention
The courts look at the words and overall circumstances, not just formal labels. Words that merely express a wish, hope, or expectation (precatory words) are not usually enough. There must be a clear, imperative intention to impose a binding legal obligation to hold property on trust.
Key Term: Precatory words
Expressions of hope or non-binding suggestions, such as “wish,” “hope,” or “desire,” which typically do not create a trust.
Worked Example 1.1
A woman’s will states: “£10,000 to my brother, trusting that he will look after my nephews.” Is this a trust?
Answer:
No trust is created. The phrase “trusting that he will look after” is precatory, not imperative. The brother takes the money outright.
Certainty of Subject Matter
It must be possible to identify with certainty the property forming the trust fund. If the property or share is described vaguely—e.g., “the bulk of my estate”—the trust fails for uncertainty.
If assets are tangible goods (e.g., wine collection), the items for the trust must be specifically set aside or segregated. For intangible assets (e.g., shares of one class in a company), identical assets do not generally need to be distinguished individually.
Worked Example 1.2
A settlor states: “I declare a trust over part of my art collection for my niece.” No paintings are identified or set aside. Is there a valid trust?
Answer:
No. The trust fails for uncertainty of subject matter; “part of my art collection” is too vague without specifying or separating the items.
Certainty of Objects
The beneficiaries must be clearly ascertainable:
- For a fixed trust: it must be possible to draw up a complete list of all beneficiaries.
- For a discretionary trust: it must be possible to say of any given person whether they are or are not a member of the class.
If the class is defined vaguely (e.g., “my friends”), the trust is conceptually uncertain and void.
Worked Example 1.3
A will leaves money on trust “for my relatives.” Is this class sufficiently certain?
Answer:
Yes. “Relatives” has a clear legal meaning. The trust will not fail for conceptual uncertainty.Key Term: Fixed trust
A trust in which each beneficiary’s share or entitlement is predetermined and not subject to the trustees’ discretion.Key Term: Discretionary trust
A trust in which trustees decide whether, how much, and which beneficiaries in a class should benefit.
Formality Requirements
Inter Vivos Trusts of Personalty
There is no general requirement for writing for trusts over personalty (movable property, such as cash, shares, or chattels) made during the settlor’s lifetime, unless legislation applies to a particular type of property.
Inter Vivos Trusts of Land
A declaration of trust in respect of land or any interest in land must be manifested and proved by some writing signed by the person who can declare such a trust (Law of Property Act 1925, s 53(1)(b)). Without such writing, the trust cannot be enforced, though it is not void.
Key Term: Realty
Land and buildings; immovable property.
Trusts in Wills
Trusts created by will satisfy all formality requirements if the will is signed and witnessed correctly under the Wills Act 1837.
Disposition of a Subisting Equitable Interest
A beneficiary transferring their equitable interest must do so in writing, signed by themselves or their agent (Law of Property Act 1925, s 53(1)(c)). Oral transfers of equitable interests are void.
Key Term: Equitable interest
The beneficial interest in property held on trust, as distinct from legal title.
Worked Example 1.4
A is entitled to half the income of a trust fund. He writes and signs a letter to the trustees instructing them to pay it to B. Is this effective?
Answer:
Yes. The disposition of A’s equitable interest is valid as it is in signed writing. If only an oral instruction was given, it would be void.
Exam Warning
If the legal and equitable title move together (e.g., a bare trust: trustee transfers full legal title to another), s 53(1)(c) does not apply. But where a beneficiary gives away only their equitable interest, s 53(1)(c) must be observed.
Constitution: Vesting the Trust Property
Once the trust is declared, the legal title to the trust assets must actually be transferred to the trustee, in the correct manner for that type of property. This is constitution. Until then, the trust is incompletely constituted.
Key Term: Constitution
The process by which legal title to trust property is vested in the trustee.
Until the trust is fully constituted, the beneficiaries who have not provided consideration (“volunteers”) have no rights against the intended trustees or settlor.
Key Term: Volunteer
A person who has not given valuable consideration for a benefit (such as a gift); in trust law, most beneficiaries are volunteers.
Where the settlor declares herself trustee, and already holds the legal title, no transfer of title is needed.
But if another person is appointed trustee, the settlor must complete the proper transfer. For land, this requires a deed. For shares, this requires a stock transfer form and (if applicable) registration. For chattels, actual physical delivery or deed is required.
Worked Example 1.5
A father executes a deed declaring that he holds his own shares on trust for his daughter. Has the trust been constituted?
Answer:
Yes. As settlor and trustee are the same and the legal title is already held by the trustee, the equitable interest separates and passes to the daughter.
If the trust is incompletely constituted (property not vested in the trustee), the beneficiaries cannot compel the settlor or trustee to complete the arrangement—unless consideration has been given (e.g., by contract or marriage settlement).
Consequences of Non-Compliance
- Failure to satisfy any of the three certainties—the trust is void.
- Breach of writing/formality rules—unenforceable (for s 53(1)(b)) or void (for s 53(1)(c)).
- Incomplete constitution—volunteers cannot enforce; only those who have provided consideration (e.g., contract, marriage) might have rights.
Revision Tip
Always check, step-by-step: the three certainties; the correct formality for the type of property and the transaction; and that legal title has been transferred as required.
Key Point Checklist
This article has covered the following key knowledge points:
- The three certainties (intention, subject matter, objects) are always required for an express trust.
- Trusts of land must be evidenced in writing and signed by the settlor; trusts of personalty usually do not require writing.
- A disposition of an existing equitable interest must be made in writing, signed by the disponor.
- Constitution requires vesting of the trust property in the trustee by the correct transfer method for that property type.
- Until constitution is complete, volunteers cannot compel performance; only beneficiaries providing consideration may have rights.
- If a certainty or a required formality is missing, the trust fails or is unenforceable.
Key Terms and Concepts
- Three certainties
- Settlor
- Precatory words
- Fixed trust
- Discretionary trust
- Realty
- Equitable interest
- Constitution
- Volunteer