Type of Trust and Law of Trust

What Is a Trust?

A trust is traditionally used for minimizing estate taxes and can offer other benefits as part of a well-crafted estate plan.

Now we can look at the different types of Trusts that exist and where they arise.

In particular we’re going to focus on the following different classifications:

There is general agreement as to what constitutes an express trust vs an implied or constructive trust.
However, there is lesson agreement as to the fundamental rationale of the Trusts in their classification.
The express vs implied classification is the traditional way in which trusts are classified.
The idea of an express trust is where the settlor/testator will declare an express intention for the property in question to be held on trust.
It can either be explicit, “this is going to be held on trust”, or one can infer from language that the intention of the settlor was to create an express trust.
We can further categorise express trusts.
The first of these sub-categories is the ‘fixed express trust’:

Where the settlor/testator clearly specifies the trust, the trustee, the beneficiaries etc.
This means that the trustee has no discretion as to the proper order and purpose of the trust.

Unlike in a fixed trust, the trustee has a discretion as to who may be the beneficiary of the trust.
This is often done in a situation where there is still some guidance by the settlor/testator as to who can be a beneficiary, but some discretion is then given to the trustee.

These are express trusts where the trust is said to be established for a purpose, not for a person.

Unlike an express trust, where there is an expressed intention for the property to be held on trust, an implied trust is where there is no express intention.
Therefore, the courts have to imply the existence of the trust.
There are two kind of implied trust:

This comes into existence by law where property has transferred to someone who pays nothing for it.
It is then implied that the property is held on trust for the benefit of another person.

Of course, this resulting trust can be negated if it is shown that the person transferred the property for free because they were giving a gift etc.

Resulting trusts can also exist in the case of failed express trusts.
E.g. Say a Settlor/Testator puts a property on trust but fails to disclose direction to a trustee about what to do with all/part of the property.
If the trust fails in this instance, then an automatic resulting trust responds to the gap in ownership.
The property will then go back to the original owner.
There are some cases where we see instances of this type of trust.

This is the second type of implied trust.
In this case, the Court finds that a trust should arise out of an operation of law due to unconscionable conduct by the person who receives the property.
So, in the case of a constructive trust, the court does not examine the intention of the person who is transferring the property, but the actions of those who received the property.