TrustsFrequently Asked Questions
A Trust is a relationship that is created by express document or implication of law. A Trust can be created in many different ways and there are different types of trust. The common characteristic is that when a Trust is created, the property or assets that are in the trust, are held by one person for the benefit of another.
The person that creates the trust is known as the settlor, the people that are nominated to look after the trust assets are called the trustees and the people who benefit from the trust are called the beneficiaries.
When someone is appointed as a trustee they acquire certain duties to act in a certain way. If the trust is created in a document (usually called a Trust Deed), the document will set out specific duties and it may set out the limits of what a trustee can and can’t do with the trust assets. However, in addition to any express duties, (or where the trust is created by implication), there are statutes (Acts of Parliament) that imposes additional duties, these are called the Trustee Act 1925 and Trustee Act 2000.
A trustee always has a fiduciary duty to act in good faith, this means that every action they take in relation to the trust assets must be taken with strict honesty and with regard to the interests of the beneficiaries. In addition, a trustee must exercise reasonable skill and care when dealing with the trust assets.
No, a trust does not have to be created in a formal document and a trust can be created by a party’s words or actions, this type of trust is called a constructive, resulting or implied trust. If the trust is not created in a document, then it may be more likely that a dispute will arise as there may be a dispute over whether the trust exists, and if it does, there will not be any specific duties other than the statutory ones imposed in the Trustee Act 1925 and the Trustee Act 2000.
A trust may be created by document, such as a Trust Deed or in a Will, or in one of the following ways:
- Direct Financial Contribution to the purchase price for a property or by paying mortgage instalments may create a type of Trust called a resulting trust. This may entitle the person who has made the contributions to claim a share in the property.
- A promise or agreement. Where two parties reach an agreement that they both have a share in the property it may create a constructive trust. A Trust will be created where the person not named on the title documents for the property relies on the promise made by the other party to their detriment. Another argument that is often run along with the constructive trust claim is a claim under a legal principle called proprietary estoppel.
- Secret Trusts are created by a testator (person making a Will) who makes a specific gift to a party because that party has made a promise to hold it for a third party not listed in the Will.
- If there is a claim for an interest in a property, the parties may seek an order under a statute called the Trust of Land and Appointment of Trustees Act 1996 (TOLATA) for a declaration stating the extent of their share in the property and if necessary an order for sale of the property.
You may have a claim against a Trustee if they are not carrying out their duties properly, if they have done something that is not permitted in the trust deed, or if they have done something that reduces the value of the trust assets.
You may also have a claim if a professional trustee is claiming costs from the trust. A professional trustee may be entitled to claim a fee from the trust however, those fees must be reasonable.
The cost of legal assistance with a claim of this nature will vary depending on several factors, such as how many different parties are involved, the exact nature of the trust and the basis for the claim, how much paperwork there is, how many witnesses and what the type and value of the trust assets are. At Start Point Law we charge an initial fixed fee of £500. The fee will include the following:
- An initial meeting with you to discuss your concerns;
- Making initial enquiries if necessary with other parties, to try to obtain a copy of the trust document, annual statements and a current valuation of the trust;
- Identify other potential parties to the claim;
- As far as possible, ascertain details of what the assets are in the trust;
- A detailed letter of advice which will set out our advice, the likely overall costs of the claim, how likely it is that your claim will succeed and the estimated timescales.