Trusts Checklist
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What kind of a trust is it?
o Express or by operation of law (resulting/constructive)
o Creation - inter vivos or testamentary
o Objects - persons or purposes
 Purposes – charitable or non-charitable
o Powers - fixed or discretionary
What kinds of interests are created?
o Legal/equitable
o Contingent/vested
 Contingent – are there perpetuity issues?
 Vested – are they defeasible or determinable? Or indefeasible?
 Are they vested in interest or possession?
It is a valid trust?
o Capacity
 Settlor must have capacity
 Age of majority, mental capacity, juridical person, not bankrupt
 Trustee must be a juridical person (to hold property)
 Beneficiary must be a juridical person (to hold legal or equitable title to property)
o Three certainties
 Certainty of intention
 Settlor needs to intend to create a trust relationship
 Can be inferred from words, orally, conduct
 No formal requirements, no specific words required
 Certainty of subject matter
 Certainty of property to be held on trust
o Specific piece of property, specific fund, formula
 Certainty of amount, or share, of the trust property that the beneficiaries of
the trust are to receive
o Set amount for each beneficiary, formula for determining amount,
giving trustee discretion
 Certainty of objects
 Trust for persons – certainty of beneficiaries
o Must have some way of determining who the beneficiaries are
o Fixed trust – class ascertainablity/complete list (Broadway
Cottages)
 Need to determine whether any given person is a member
of that class, AND identify every member of the class
o Discretionary trust – individual ascertainability (McPhail v.
Doulton, Jones v. T. Eaton)
 Whether it can be said with certainty that any individual is
or is not a member of the class
 Need conceptual, not evidential certainty – need to
understand who could be in the class, not necessarily who
is in the class (Re Connor)
 Trusts for purposes – certainty of purposes
o Must know or have some way of determining whether a particular
act would be consistent with that purpose
o Constitution
 Ways of constituting a trust
 Settlor can transfer the intended trust property to another person to hold
as trustee
 Settlor can declare themselves to be a trustee with respect to property they
own
o Need clear evidence of intention (Paul v. Constance, Watt Estate)
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Trusts Checklist
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Third party can transfer property to the trustee that is intended to be the
subject matter of the trust
 How interests in property are transferred
 Legal interests
o Land – statutory instrument of transfer (Torrens), deed
o Chattels – title usually indicated by possession
o Choses in action – transfer by assignment
 Legal assignment – in writing, signed by assignor, notice
given to debtor
 Equitable assignment – no particular form required
o Negotiable interests – transferred by negotiation
o Securities – usually statutory requirements
 Equitable interests
o Assignment of equitable interest to a trustee on trust for the
proposed donee
o Declaration by that person that he or she is a trustee of the
equitable interest for the proposed donee
o Instruction to existing trustee to hold the equitable interest in
favour of the new intended beneficiary
 Settlor must do everything he can to effect the transfer (Milroy, Re Rose)
 Court won’t substitute one form of transfer for another (Milroy)
 Gratuitous deed
 Court won’t complete an incomplete gift
 No specific performance (Re Pryce, Kay’s Settlement)
o Possibly damages (Canon v. Hartley) – must be a party to the deed
(beneficiary or trustee)
 Possible to argue the promise itself was the subject matter of the trust, so
trust constituted when deed signed, sealed and delivered (Fletcher)
 Transfer for value – promise given in exchange for consideration (contract)
 Only person who furnished value can sue, possible specific performance if
damages are inadequate
 Promise to convey in future (gratuitous promise)
 Not enforceable w/o consideration (Re Ellenborough)
Formalities
 Express trusts for persons or purposes
 Statute of Fraud
 Look at jurisdiction – applies in Ontario, NS, NB; doesn’t really apply in BC
anymore
 Ontario, NS, NB – applies to
o Contracts with respect to land
o Creation of trusts with respect to land
o Assignment of equitable interests in trusts
o But – look at doctrine of part performance, doctrine of fraud
 BC – s. 59 of Law and Equity Act
o Applies to contracts regarding land
o Doesn’t apply to dispositions of land by way of trust or assignments
of equitable interests
 Wills
 Requirement for a valid will are in the Wills Act – must be complied with in
order to make a valid testamentary disposition
 Secret trusts
o Property is bequeathed to a person in a will with no indication in
the will that the person is to hold the property in trust
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Trusts Checklist
Testator must communicate trust obligation to trustee before their
death and trustee must accept (McCormick, Boyes)
o Need clear evidence of intention, communication and acceptance
(Ottaway)
Semi-secret trust
o Indication that donee takes on trust but no indication of who the
beneficiaries are in will
o Testator must communicate trust obligation to trustee before or at
the time the will is made and trustee must accept (Blackwell)
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Public policy
 Illegality
 Settlor may not be able to get the property back – unclear (Symes v. Hughes,
Great Berlin Steamboat, Tinsley, Scheuerman, Krys, Goodfriend)
 Property in a trust may be confiscated if it is the proceeds of crime, or if the
trust is being used for money laundering or terrorism
 Effects of invalid conditions
 SEE CHART
 Contrary to public policy
 Restraint of marriage (imposing lifetime celibacy) (Re Cutter)
 Interference with marital relationships (Re Hurshman)
 Interference with discharge of parental duties (Clarke v. Darraugh)
 Discriminatory conditions (Leonard Foundation)
 Restraints on alienation (may be invalid) or interference with enjoyment of
property (are invalid)
 Trusts that defraud creditors
 Fraudulent conveyance legislation – can’t dispose of property in a way that
is meant to defraud creditors
 Fraudulent preference legislation – can’t prefer one creditor over another
when you are on the eve of bankruptcy
 Rule against perpetuities
 **Only applies to contingent interests
 Look at:
o What jurisdiction is the property subject to the trust located in?
o What interests are created?
o Are the interests contingent?
o What are the relevant lives in being referred to in the instrument?
 Implicitly and explicitly
 Implicit – e.g. to my grandkids – your kids are implicit lives
in being
o Is there any possibility that an interest will vest outside the
perpetuity period?
o How do the legislative modifications affect the application of the
common law rule?
o Is there an accumulation issue? (mostly Ontario)
 Modern rule – remoteness of vesting
o An interest is valid if it must vest, if it is going to vest at all, within a
period calculated by taking the lives in being, at the date the
instrument takes effect, plus 21 years
 Lives in being – everyone affected who is alive when the
instrument is created
 Rule against perpetual duration
o Modern rule with no lives in being
o When there are no lives against which to measure the perpetuity
period, the period is 21 years
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Trusts Checklist
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Old rule – rule in Whitby v. Mitchell
o Gift of life interest to an unborn person with remainder to the issue
of the unborn person with the life interest is invalid
 Legislative modifications
o BC – wait and see abrogates Whitby v. Mitchell, retains modern
rule with a series of saving provisions
 Protective trusts
 Settlors can impose restraints on mode, class, period of time – issue is the
degree of the restraint
 In Canada, it’s difficult to create an effective protective/spendthrift trust
Can the beneficiary override or terminate the trust?
o EXPRESS FOR PERSONS - Settlor could expressly reserve a power of revocation in the trust
instrument
o EXPRESS FOR PERSONS - Trust can be terminated before its full implementation under the
rule in Saunders v. Vautier
 One or more beneficiaries, all of full legal capacity, and who is, or are, collectively
entitled to all the beneficial interest in the trust may apply to have the trust
terminated and the assets transferred even though the trust instrument calls for
final payment to be delayed
 3 key elements:
 Beneficiaries must have full legal capacity
 Beneficiaries must, collectively, have all the equitable interest in the trust
property
 Beneficiaries must unanimously agree to terminate the trust
 Avoiding application
 Contingent interest in a person who will refuse to consent
 Interest or contingent interest in a minor or unborn person (person who
can’t consent)
 Discretion to distribute among a class with some members of the class
being difficult to ascertain
o EXPRESS FOR PERSONS - Trust can be varied by an application to a court for the variation of
the trust pursuant to a statutory power given to the court
 Trust and Settlement Variation Act
 Court can consent on behalf of certain people to vary the trust
 Test is whether a rational person would consent to the variation (Smith)
 Benefit required by s. 2 of the Act can be financial or non-financial (Re
Kovish, Smith)
 In Ontario – 3-part test from Finnell v. Schumacher
o CHARITABLE TRUST – the terms of, or intent of the settlor, in a charitable trust can be varied
by the operation of the doctrine of cy pres or by an administrative scheme
When is a non-charitable purpose trust valid?
o There needs to be someone who can be given standing to enforce the trust (Re Denley,
Keewatin, Peace Hills)
o If there are perpetuity problems, use BC Perpetuity Act s. 24 – can treat a non-charitable
purpose trust as a power and limit the power to a period of 21 years
 A little unclear when this applies (Re Russell)
o What if there is a gift to an unincorporated association?
 Different ways to save it, depending on the association’s constitution and the nature
of the gift
When is a charitable purpose trust valid?
o Exclusive dedication of property
 Trust must only be for charitable purposes – can’t be partly for a person or a noncharitable purpose
 BC Law and Equity Act s. 47 – can sever non-charitable purpose
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Trusts Checklist
To a charitable purpose
 What is considered a charitable purpose comes from the Statute of Charitable Uses
(1601), grouped into 4 modern categories in Pemsel
 The relief of poverty
o Relative concept, varies over time
o Public benefit requirement not as stringent – poor relations, poor
employees cases
 The advancement of education
o Valid if: geared at the training of the mind, provided in a structured
manner, for a genuinely educational purpose, not just for the
promotion of a particular point of view or political orientation
(Vancouver Society)
 The advancement of religion
o Tolerant of a wide range of religions (Versani)
o Historically required a belief in God, but may include belief in a
supernatural being, thing or principle (Church of the New Faith –
AUS case)
o Likely needs to be public in some way (Gilmour v. Coats)
 Other purposes beneficial to the community (from preamble)
o Social welfare purposes
o Community purposes
o Not trusts for sports (Re Nottage, Amateur Youth Soccer Assn)
o Needs to not only be beneficial to the community, but also
consistent with existing case law on what is considered charitable
under the fourth head (Vancouver Society)
o In a way that provides a public benefit
 Benefit – something of practical utility (Re Pinion) or a material and tangible benefit
(Gilmour and Coates)
 Public
 Number of potential beneficiaries must not be numerically negligible
(Oppenheim)
 Must not depend on beneficiaries’ relationship to a particular person
(Oppenheim)
 Presumption of public benefit for relief of poverty, education, religion; no
presumption for purposes beneficial to community
o (and not for a political purpose)
 General rule: trusts for political purposes are invalid even where they are for
otherwise valid charitable purposes (McGovern, Bowman, Human Life
International)
 Charitable purpose can’t be discriminatory (Re Leonard)
When can the court vary a charitable purpose trust?
o Administrative scheme-making power
 Used when there is uncertainty about how charitable intent is to be achieved –
certainty of purposes requirement
 Court can make an order where it is clear that the settlor has a charitable intent but
they haven’t made it sufficiently clear how to achieve this intent
o Cy-pres
 Used by the court when a charitable purpose is, or has become, impossible or
impracticable to carry out
 Court can apply the funds to another purpose similar to the original one
 Initial vs subsequent failure
 Initial failure – arose before the trust was constituted
o Court looks to whether there was a general charitable intent
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Trusts Checklist
Question: if the specific use the settlor has in mind couldn’t be
carried out, would the settlor have directed the property to some
other charitable purpose?
o Prob won’t apply where there is a gift over to some person in the
event the intended gift or trust fails – shows no general charitable
intent
 Subsequent failure – arose after trust was constituted
o Cy-pres operates automatically
Court won’t use cy-pres or an admin scheme just because there is a better use for
the money (Rector, Wardens and Vestry of the Parish of Christ Church)
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