English trust law concerns the creation and protection of asset funds, which are usually held by one person for someone elses benefit. Trusts were a creation of the English law of property and obligations, but also share a history with countries across the Commonwealth and the United States. Trusts developed when claimants in property disputes were dissatisfied with the common law courts and petitioned the King for a just and equitable result. On the Kings behalf, the Lord Chancellor developed a parallel justice system in the Court of Chancery. Historically, trusts were mostly used where people left money in a will, created family settlements, created charities, or some types of business venture. After the Judicature Act 1873, Englands courts of equity and common law were merged, and equitable principles took precedence. Today, trusts play an important role in financial investments, especially in unit trusts and pension trusts, where trustees and fund managers usually invest assets for people who wish to save for retirement. Although people are generally free to write trusts in any way they like, an increasing number of statutes are designed to protect beneficiaries, or regulate the trust relationship, including the Trustee Act 1925, Trustee Investments Act 1961, Recognition of Trusts Act 1987, Financial Services and Markets Act 2000, Trustee Act 2000, Pensions Act 1995, Pensions Act 2004 and the Charities Act 2011. Trusts are usually created by a settlor, who gives assets to one or more trustees, who undertake to use the assets for beneficiaries. Like in contract law no formality is required to make a trust, except where statute demands it (e.g. transfers of land, shares, for wills). To protect the settlor, English law demands a reasonable degree of certainty that a trust was intended. To be able to enforce the trusts terms, the courts also require reasonable certainty about which assets were entrusted, and which people were meant to be the trusts beneficiaries. Unlike some offshore tax havens and the United States, English law requires that a trust has at least one beneficiary if it is not charitable. The Charity Commission monitors how charity trustees perform their duties, and ensures charities serve the public interest. Pensions and investment trusts are closely regulated to protect peoples savings and ensure that trustees or fund managers are accountable. Beyond these expressly created trusts, English law recognises resulting and constructive trusts that arise by automatic operation of law to prevent unjust enrichment, to correct wrongdoing or to create property rights where intentions are unclear. Although the word trust is used, resulting and constructive trusts are different because they mainly create property-based remedies to protect peoples rights, and do not flow from the consent of the parties. Generally speaking, however, trustees owe a range of duties to their beneficiaries. If a trust document is silent, trustees must avoid any possibility of a conflict of interest, manage the trusts affairs with reasonable care and skill, and only act for purposes consistent with the trusts terms. Some of these duties can be excluded, except where the statute makes duties compulsory, but all trustees must act in good faith in the best interests of the beneficiaries. If trustees breach their duties, the beneficiaries may make a claim for all property wrongfully paid away to be restored, and may trace and follow what was trust property and claim restitution from any third party who ought to have known of the breach of trust.
Posted on: Sun, 28 Sep 2014 06:29:28 +0000
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