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QN: Capacity to create a trust A trust is defined as a relationship which is recognized by equity. It arises where property is vested in a person or persons known as trustees and of which the trustees are under a duty to hold for the benefit of other persons known as beneficiaries. In common law legal systems, a trust is an arrangement whereby property (including real, tangible and intangible) is managed by one person (or persons, or organizations) for the benefit of another. A trust is created by a settlor (or feoffor to uses ), who entrusts some or all of their property to people of their choice (the trustees or feoffee to uses ). The trustees hold legal title to the trust property (or trust corpus ), but they are obliged to hold the property for the benefit of one or more individuals or organizations (the beneficiary, cestui que use , or cestui que trust ), usually specified by the settlor, who hold equitable title. The trustees owe a fiduciary duty to the beneficiaries, who are the "beneficial" owners of the trust property. The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust property in accordance with both the terms of the trust document and the governing law. A valid trust cannot be created unless the purported creator of the trust has the power to create it and the purported beneficiaries have the ability to accept the equitable interests purported to be conferred on them and what are known as ‘the three certainties’ must be present; if any of these are absent, the purported trust will fail. The first, certainty of words, requires that it shall be clear that a legally binding obligation is imposed on the alleged trustee or trustees; the
Second, certainty of subject, that there shall be no ambiguity about either the property subject to the trust or the exact interests to be taken by the beneficiaries; and the Third, certainty of objects requires that the beneficiaries shall be ascertainable and clearly identified which involves a consideration of the ‘beneficiary principle’. which requires that—with certain exceptions, of which the most important is the charitable trust—a trust, in order to be valid, must be for the benefit of individuals. Therefore, for there to be a valid trust, the trustee and the settlor must have the capacity to create a trust. Capacity It must be asked whether anyone can declare a trust, whether anyone can administer a trust property and whether anyone can benefit from a trust. The capacity of each of the three main parties to an express trust — the settlor, the trustee and the beneficiary — must be examined. The issue of capacity focuses on two concerns: whether the person under consideration has to be a particular age and whether the person must have mental stability in order to have capacity. Capacity of the trustee[s] Generally, anyone can be a trustee of a trust property provided they are 18 years of age or older and of sound mind. Section 34(2) of the Trustee Act 1925 provides that the maximum number of trustees of land at any one time is four. Where more than four people are named as trustees, the trustees will consist of the first four named only. As an exception, charitable or ecclesiastical trusts of land may have an unlimited number of trustees. Normally, it is good practice to have at least two trustees, so that one may both assist and keep a watchful eye over the other.
Martin might acquire from his father upon his father’s death was to be held on the same basis. Martin was, consequently, declaring a trust of property that he might acquire in the future. Albert died in May 1887, nearly four years after declaring the trust. Martin attempted to repudiate the trust in July 1888 which, by then, was nearly five years after the trust had been declared. The House of Lords held that Martin could not repudiate the trust. Whilst they affirmed the rule that a contract was voidable before a child reached 18 years old, or within a reasonable time of reaching 18 years old, their Lordships held that Martin had waited too long before repudiating the contract. Lord Watson explained the issue of repudiation as: If he [the former child] chooses to be inactive, his opportunity passes away; if he chooses to be active, the law comes to his assistance.^4 For our present purposes, the case illustrates that a child can be a settlor of a trust of personalty. The child also has the ability to repudiate the trust, either before he reaches 18, or within a reasonable time of reaching 18. What is a reasonable time will be a question of fact for the court to resolve: the House of Lords found it unnecessary in the case to set down what period of time was reasonable in every case. A child cannot own the legal estate in realty. Under Sched 1, para 1 of the Trusts of Land and Appointment of Trustees Act 1996, any realty conveyed to a child will be held automatically on trust for them, so they will only be able to enjoy an equitable interest in the property. Since a child is himself a beneficiary of such a trust and is unable to deal with the legal estate in the realty, the most a child can do with realty is to declare a trust of their equitable interest. Mentally incapacitated individuals.
Section 1(f) of the Mental Health Act Chap 279 , defines a person of unsound mind to mean an idiot or a person who is suffering from mental derangement. Generally, a person who is mentally abnormal cannot create a trust. Under the trustees Act, the court may direct a settlement to be made of the property of a lunatic or an part thereof or any interest therein, on such trusts and subject to such powers and provisions as the court may deem expedient. Whether or not a person suffering from mental capacity has the ability to declare a trust was considered; In Re Beaney [ 1978] 1 WLR 770 , Where the High Court held that whether a trust would be recognized depended on the size of the property being given away. In this case, Mrs Maud Beaney owned her own home in Cranford, Middlesex. She had three children: Valerie (the eldest), Peter and Gillian. Mrs Beaney suffered from an ‘advanced state of senile dementia’ 6 from October 1972 until her death in 1974. In May 1973, Mrs Beaney was admitted to hospital. Whilst there, Valerie claimed that her mother had decided to give her house to her. Valerie explained that this was in case the house needed to be sold at a future point to provide funds for the cost of her mother’s care. Valerie asked a solicitor to draw up a document, formally transferring the house into her name. The solicitor brought the document to Mrs Beaney and explained to her that if she signed it, its effect would be to give the house to Valerie absolutely. The solicitor asked Mrs Beaney twice whether she understood the nature of the document and on both occasions, Mrs Beaney confirmed that she did. The solicitor, Valerie and a third witness believed that Mrs Beaney understood what she was doing when she signed the transfer document. After her death, Peter and Gillian argued that Mrs Beaney had lacked capacity to transfer the house to Valerie. They said that their mother was confused, as illustrated by her calling her family by incorrect names, having a tendency to get into the wrong bed
At common law, a wifes chattles became the absolute property of the husband, who would also possesss the ppower to reduce her choses in action into possions and uopon the birth of issues, he enjoyed the seizing for life of such present estates of inheritance as his wife might have possessed as “tenancy by courtesy” However, from the reign of Elizabeth the 1, the court of Chancery evolved the doctrine of separate estate of a married woman and it was established by the courts of Chancery the what ever property was given to trustees for the separate use of a married woman, she could hold and dispose of it in equity free from her husband ‘s interference and such property was protect effectually against the husband’s debts or other obligations. Further to note is that under Article 33 of the 1995 Constitution of the Republic of Uganda provides for Rights of woman and accords women full and equal dignity of persons with men and also Section 3 of the Land Act Cap 227 which provides for the forms of tenure has not side lined women in the customary tenure ownership of land. Companies Trading companies, which are incorporated under the companies Act, have an implied power to Borrow for the purpose of the companies business and these power is used to issue debentures and for the purpose of buttressing the issue that the company has power to execute a trust deed by which after conevnaning to repay the loan with interest until payment, assigns to trustees real property or leaseholds belonging to the company to constitute security for the repayment of the loan, and the trustees undertake to hold the property upon certain trusts in favor of the debenture holders. Formalities for creation of Trust. Registration of Titles Act.
Asettlor may create atrust by manifesting an intention to create it. Evidence in writing is required for the creation of such atrust in land. thus section section 92 of the Registration of Titles Act Cap230, states that any declaration of trust in land must be evidenced by a memorandum in writing signed by the party creating the trust. By will; Secret trust. Section 50 of the Succession Act Cap 165, all trusts created by testamentary disposition must be executed and attested in accordance with the formalities therein prescribed and these are; That the will shall be in writing and that it shall be signed at the foot or end thereof by the attestator or some other person in his presence and by his direction. That the signature be acknowledged by at least two witnesses in writing in the presence of the testator.
