Trusts and Public Policy
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What are the three categories of limitations that will invalidate an express trust which satisfies the requirements of formality, certainty and complete constitution?
- These categories are;
- 1.) The attempt by the settlor to use the trust format to defeat the claims of the creditors of settlors or beneficiaries or even the claims of one's spouse or partner when relationships break down.
- 2.) An umbrella of 'public policy' prohibitions which are concerned to prevent the undermining of accepted notions of morality and family solidarity.
- 3.) Final category of limitations is concerned with the 'plane of time' a trust lasts for and is imposed through rules of perpetuity, accumulations and inalienability on the duration of trusts.
Why is the law of Trusts keen to encourage Freedom of Disposition?
This is because in a pure liberal or market the society, if the market is to carry out its function of allocation of resources amongst various uses, property must be freely inalienable. If a person controlling property can dictate how it is used after he disposes of it then the recipients do not have freedom of disposition.
What is a condition precedent?
This exists where A gives property to B but subject to a condition that the interest is not to commence until the occurrence of some event. An example is a transfer of property on trust for B if and when B qualifies as a civil engineer.
What is a condition subsequent?
This operates to terminate an already existing interest, for example, property is held on trust for B as long as B does not marry a domestic servant.
What limits on the conditions can be imposed?
The condition must satisfy the requirement of certainty. The certainty test for conditions subsequent have been stated to be stricter than for conditions precedent.
A condition subsequent could also be held to be void if it purported to take away the freedom of alienation.
What is a 'Determinable Interest'?
This is an interest that will automatically terminate on the occurrence of some specified event. Such dispositions do not fall foul of the rule against 'repugnancy'. These are often used to prevent the trustee from having his interest seized by creditors.
What is the difference between a Determinable Interest and a Condition Subsequent?
The differences lie in the language and concept. An example; 'a gift to A but if he alienates then to B' (Condtion) or 'to A until he alienates and then to B' (a limitation). The conceptual differences can be inferred from the linguistic. A limitation marks the boundary of the estate, a condition defeats the estate before it attains it's boundary.
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