Express Trusts

Introduction

An express trust is a deliberate arrangement where a settlor transfers property to a trustee to hold for beneficiaries. It is created on purpose (rather than imposed by law) and used widely in family wealth planning, business, and property deals. For law students, trainees, and practitioners, the key is to confirm the trust was properly created, the property is clearly identified, and the beneficiaries can be determined.

Courts look for the “three certainties” (intention, subject matter, objects), supported by appropriate formalities and constitution of the trust. Equity will not assist a volunteer: if the trust is not properly set up or funded, it may fail.

What You’ll Learn

• What makes a trust “express” and how it is created during life or by will
• The three certainties with leading cases
• Formalities for land and personal property (LPA 1925; LP(MP)A 1989; Wills Act 1837)
• Constitution: completing the transfer or self‑declaration, and the “imperfect gift” rule
• How courts handle subject-matter problems (wine, bullion, and shares cases)
• Tests for identifying beneficiaries in fixed and discretionary trusts
• Practical drafting and compliance tips, including HMRC Trust Registration Service (TRS)
• How sham or illusory arrangements are treated

Core Concepts

Creating an Express Trust: Formalities and Constitution

An express trust can be created:

• Inter vivos (during the settlor’s lifetime), either by transferring property to trustees or by self‑declaration; or
• By will (effective on death).

Formalities depend on the property and the act being done:

• Trusts of land must be evidenced in writing signed by the person able to declare the trust (LPA 1925 s53(1)(b)). Transfers of legal title to land usually require a deed (LPA 1925 s52; LP(MP)A 1989 s1) and a valid contract for sale of land must be in writing, containing all agreed terms (LP(MP)A 1989 s2).
• A disposition of a subsisting equitable interest must be in writing signed by the disponor (LPA 1925 s53(1)(c)).
• Wills creating testamentary trusts must comply with Wills Act 1837 s9 (in writing, signed, witnessed).
• Choses in action (e.g., debts) may require statutory assignment formalities (LPA 1925 s136) or a trust declaration.

Constitution matters. A trust is complete when the settlor has:

• Effectively transferred the property to the trustee; or
• Declared themself trustee.

If the intended transfer is not completed, equity generally will not perfect it (Milroy v Lord (1862); Richards v Delbridge (1874)). Two refinements sometimes assist:

• Re Rose (1952): where the settlor has done everything necessary on their part.
• Pennington v Waine [2002]: in limited circumstances, it may be unconscionable to deny the transfer.

Compliance and administration:

• Most UK express trusts must register with HMRC’s Trust Registration Service (TRS) under the Money Laundering Regulations 2017, unless exempt.
• For land sales, payment to two trustees or a trust corporation allows overreaching (LPA 1925).
• Keep clear records, segregate trust assets, and minute trustee decisions.

Tip: If the settlor wishes to retain powers, ensure these do not hollow out the trust. Excessive control may render an arrangement illusory (see JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017]).

Certainty of Intention

The settlor must show a clear intention to create a binding trust, not merely express a wish or hope. Words of recommendation or courtesy (precatory words) are usually inadequate.

• Precatory words insufficient: Re Adams and the Kensington Vestry (1884); Jones v Lock (1865).
• Intention can be inferred from conduct and words taken together: Paul v Constance [1977] (statements and behaviour around a bank account supported a trust).

The word “trust” is not essential, but the language must impose an obligation on the trustee. Courts look at the whole context to decide whether a binding trust was intended.

Certainty of Subject Matter

The property placed on trust must be sufficiently certain so the trustee knows exactly what is held and for whom. Problems arise with unsegregated or indistinguishable assets.

• Tangible, unsegregated goods: trust failed where bottles of wine were not identified or separated (Re London Wine Co [1986]) and similarly with bullion (Re Goldcorp Exchange Ltd [1995]).
• Intangible, fungible assets: trust upheld for an unsegregated number of identical shares (Hunter v Moss [1994]); followed in Re Harvard Securities [1997]. This distinction between tangible and intangible property remains debated. Best practice is still to identify and, where possible, segregate assets.

If the subject matter or the beneficial shares cannot be determined, the trust may fail.

Certainty of Objects

Beneficiaries must be identifiable with sufficient certainty.

• Fixed trusts: all beneficiaries must be ascertainable (complete list test) per IRC v Broadway Cottages [1955].
• Discretionary trusts: the “any given postulant” or “is or is not” test applies — can it be said of any person whether they are in the class? (McPhail v Doulton [1971]; applied in Re Baden (No 2) [1973]). Conceptual clarity is required; evidential difficulty in finding people does not usually void the trust.

Additional guardrails:

• Terms like “friends” are typically too uncertain for a discretionary trust, but may work for a series of gifts subject to a condition precedent (as in Re Barlow’s Will Trusts [1979]).
• Administrative unworkability can void a trust where the class is too wide for sensible administration (e.g., “inhabitants of West Yorkshire” in ex p West Yorkshire MCC [1986]).
• A power may be void if “capricious” (Re Manisty’s Settlement [1974]).
• Uncertainty can sometimes be cured by a third‑party decision mechanism (Re Tuck’s Settlement [1978]).
• Charitable trusts are different: they need no named beneficiaries, but must meet the legal definition of charity and public benefit.

Key Examples or Case Studies

• Certainty of intention

  • Re Adams and the Kensington Vestry (1884): moral obligation wording was not enough to impose a trust.
  • Jones v Lock (1865): loose talk about gifting a cheque to a child did not create a trust.
  • Paul v Constance [1977]: consistent statements and shared treatment of a bank account supported a trust.

• Certainty of subject matter

  • Re London Wine Co [1986] and Re Goldcorp [1995]: no trust over unsegregated chattels.
  • Hunter v Moss [1994] and Re Harvard Securities [1997]: trust over unsegregated identical shares upheld; still controversial — draft to avoid reliance on this distinction.

• Certainty of objects

  • McPhail v Doulton [1971] and Re Baden (No 2) [1973]: “is or is not” test for discretionary trusts; conceptual certainty required, evidential gaps tolerated.
  • Re Barlow’s Will Trusts [1979]: “friends” too uncertain for a discretionary trust, but valid as a condition precedent for individual gifts.

• Constitution and imperfect gifts

  • Milroy v Lord (1862) and Richards v Delbridge (1874): equity will not perfect an imperfect gift; either transfer title or declare a trust.
  • Re Rose [1952] and Pennington v Waine [2002]: limited exceptions where the transferor has done enough or where it is unconscionable to deny the transfer.

• Sham/illusory trusts

  • JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017]: extensive settlor control rendered trusts illusory; assets treated as the settlor’s.
  • National Crime Agency v Dong [2017]: courts will scrutinise arrangements claimed to be trusts when used to shield assets.

Practical Applications

• Planning the structure

  • Choose the trust type: fixed, discretionary, or life interest (IPDI).
  • Define purposes and beneficiaries carefully; avoid vague relational terms unless paired with clear criteria.
  • Include default provisions to avoid a resulting trust if the class fails.

• Drafting the deed or will

  • Use mandatory language imposing binding duties on trustees.
  • Identify the trust property precisely. For shares, specify number, class, and company; for chattels, list items or segregate the batch.
  • Set trustee powers, appointment/removal, and decision‑making procedures. Consider a letter of wishes for discretionary trusts (non‑binding).
  • For land: include restrictions/notifications as needed on the title.

• Getting the formalities right

  • Inter vivos: use a deed for land and many transfers of legal title; comply with LPA 1925 and LP(MP)A 1989.
  • By will: comply with Wills Act 1837 s9.
  • If disposing of an existing equitable interest, ensure signed writing (LPA 1925 s53(1)(c)).

• Constitution: fund the trust

  • Land: execute TR1, complete, and register.
  • Shares: complete a stock transfer form, deliver the certificate, and procure registration of the new holder.
  • Chattels: use a deed of gift or deliver possession.
  • Bank accounts: open a separate trust account or execute a clear declaration of trust over the account.

• Compliance and records

  • Register with HMRC’s TRS where required and keep details up to date.
  • Keep trust accounts, minutes, and a schedule of assets. Segregate trust property from personal assets.
  • Review tax: inheritance tax relevant property regime (10‑year and exit charges), CGT hold‑over relief where available, and income tax rules for settlor‑interested trusts. Seek specialist tax advice as needed.

• Risk management

  • Avoid excessive settlor control that could make the trust illusory.
  • Use clear beneficiary definitions to avoid conceptual uncertainty.
  • Avoid very wide classes that risk administrative unworkability.
  • Ensure two trustees or a trust corporation hold land where overreaching is relevant on sale.

• Exam and practice approach

  • Step through: intention → subject matter → objects → formalities → constitution → consequences of failure.
  • Cite the leading authority for each point.
  • If a trust fails, consider resulting trust back to the settlor/estate; remember equity does not help a volunteer.

Summary Checklist

• Confirm the three certainties (intention, subject matter, objects) — cite Knight v Knight.
• Use mandatory language; avoid precatory words.
• Identify and, where possible, segregate trust property.
• Choose and define beneficiaries with objective, conceptually clear criteria.
• Apply the correct test: complete list (fixed trusts) or “is or is not” (discretionary trusts).
• Meet formalities: LPA 1925 s53, LP(MP)A 1989, Wills Act 1837 s9.
• Constitute the trust: transfer title or valid self‑declaration.
• Register with HMRC’s TRS if required; maintain records and separate accounts.
• Watch for administrative unworkability and capricious powers.
• Guard against sham/illusory features from excessive settlor control.

Quick Reference