INTRODUCTION TO TRUSTS

---‘’A trust is an equitable obligation binding upon a person (who is called a trustee) to deal with
property over which he has control (which is called the trust property) for the benefit of persons (who
are called beneficiaries) of whom he may himself be one, and any one of whom may enforce the
obligation.’’

---. A trust permits a division in the ownership of the trust property between a trustee and beneficiary so
that the trustee is compelled to act entirely in the best interests of the beneficiary in relation to the
management of whatever property is held on trust.

---A legal trust ownership is divided between two individuals that are called trustee and beneficiary.

---The role of management is vested in a person called a trustee. The trustees (hold legal titles) have
agreed to hold and manage the legal title for the benefit of beneficiaries and their conscience binds
them in equity.

---The enjoyment of the thing subject to the trust is vested in persons called beneficiaries (equitable
titles), thereby giving the beneficiaries an equitable interest in the property subject to the trust.

-- A trust must have a specific purpose, a designated beneficiary, and specific duties for the trustee as
designated by the grantor.

--Essentially the trustee is said to ‘’hold the property on trust’’ for the beneficiary. Essentially a trust is
concerned with the utilisation and preservation of wealth

- Anything capable of being transferred is capable of being trust material

--It can be deduced from the various definitions offered above, that there are in fact two fundamental
features of the trust:

1) A person holds property rights for a person or purpose – the property component; and

2) That person is obliged in equity to exercise those rights for that person or purpose – the obligation
component

--. Trustee may have legal title but the beneficiaries have the equitable interest in the property

--Trust is obligatory in nature; when a person receives property on trust they do not have any choice as
to whether or not to fulfil the intentions of the settlor as they have to do what the settlor asked or
intended them to do. The settlor is a creator of the trust and decides on the form and players involved in
the trust.

---Once the trust is created the settlor in their capacity loses control of the trust property, Even when he
later tried to go back on this trust she could not as she had surrendered her rights

--- The trustee is mandatorily obliged to hold property for the beneficiary,, Trustees must always act in
the interest of the beneficiaries; strict rules as to how trustees look after and manage trusts and be held
to account if there has been a misuse or breach of trust.
--- the trust is a triangular relationship between the settler (absolute owner of the LEGAL AND
EQUITABLE TITLE), the trustee (legal title only) and the beneficiary (who has equitable title only)

Settlor:

• The person who owns the property absolutely from the beginning. If they give their money to a
person and say they shall use it for a specific benefit (imperative instruction), the person is therefore
made a trustee under law

• Initially the absolute owner of property and can settle the property on another person to look after
it for the benefit of someone else

• A settlor can be described as holding absolute title in the property which is to be settled on trust.

• Once a trust has been declared the settlor ceases to have any active role in the trust

Trustee:

• On creation of a trust the legal title in the trust property must be vested in the trustee and held by
him on trust for the beneficiaries stated

• On receiving property on an imperative direction, a trustee will not be allowed to act with the
property on her own conscience; knows property must be looked after for somebody else means she
has become a trustee due to her conscience becoming affected

• They are the ‘’legal owners’’ of the property; in terms of all the common law rights being vested in
them

• Trustees however are not allowed to assert personal, beneficial ownership in the trust property

• Conscience is affected by direction on how to utilise subject matter

• A trustee is obliged to fulfil the directions of the settlor in dealing with the trust subject matter as if
he does not then he would be committing a breach of trust

Fiduciary/Trustee:

• Fiduciary relationship is one where there is a relationship of trust and confidence (eg doctor and
solicitor) and there is an expectation that the trustee would only act in the best interest of the client
(the settlor)

-- A fiduciary is one who owes legal duties of loyalty and utmost good faith in relation to another
person
For a trust to be effective, the settlor must not only have an intention to declare a trust over property
which they had rights over at the time of declaring the trust, but it is necessary for the person who is
to act as the trustee to take legal title in the trust fund; making a trust properly constituted

The law will not enforce a gratuitous promise

The constitution is the moment when the trust is created and the legal title vests in the person who is
the trustee; without the constitution of a trust, people will have no enforceable rights

Reasoning, Purpose and Object

In order to control one’s property—during life and
after death.
Types and Purpose may be different—financial
interest or charitable purpose.
Anything against the law, however, cannot be the
trust arrangement. Example—avoiding creditors or
lawful responsibilities.

The essential nature of the trust, thus, is that the

Settlor gives property to the Trustee to hold for the
benefit of the Beneficiary.
In some respects, Trustee can be seen as a sort of
Manager of the property.
Dichotomy of Private Rights and Trust’s
Place
 Jus In Rem or Jus In Personam?
 Dominium—Ownership—or Equitable
Interests?
 Which head does Trust fall?
----Not easily under either: seems to be little of
both