VocabuLaw

Express Trust

What is it and what does it mean?

Description of the legal term Express Trust:

An express trust is a legal arrangement in the United Kingdom created purposely by a settlor through direct and specific instructions to hold property, managed by one or more trustees, for the benefit of one or more beneficiaries. The trust is “express” in the sense that it is explicitly established by the settlor, usually articulated in a trust deed or another legal document, as opposed to arising by operation of law or through implication by the actions of the parties involved.

The creation of an express trust requires three certainties to be valid: the certainty of intention, the certainty of subject matter, and the certainty of objects. The certainty of intention means that the settlor must have intended to create a trust, evident by their words or conduct. The certainty of subject matter involves a clear identification of the trust property or assets. Lastly, the certainty of objects requires the beneficiaries of the trust to be clearly defined or at least definable.

Express trusts are used for a variety of purposes, including the management of assets on behalf of children or other individuals who are unable to manage their own affairs, tax planning, and to provide a structured way of passing on wealth or assets to avoid disputes over a person’s estate after their death. Once established, trustees have a legal obligation to manage the trust property in the best interest of the beneficiaries in accordance with the terms of the trust and applicable laws.

Trustees of an express trust have fiduciary duties, which include the duty of loyalty, the duty to act with care and skill, and the duty to act impartially among beneficiaries. The breach of these duties can give rise to legal action against trustees. Moreover, beneficiaries have the right to seek enforcement of the trust and may petition the court for various remedies if they believe the trust is being mismanaged.

The use of a trust also provides privacy since unlike a will, it does not typically become a public document. Trusts can be either revocable or irrevocable, with the former allowing the settlor to make changes or revoke the trust during their lifetime, whereas the latter cannot be modified once established without the consent of the beneficiaries.

Legal context in which the term Express Trust may be used:

Take, for example, a case where a wealthy individual, John, wants to ensure that his estate is managed for the benefit of his children after his death. John establishes an express trust by creating a trust deed. In this deed, he appoints his trusted friend, Emily, as the trustee and instructs her to manage his property by investing it wisely and using the income generated to pay for his children’s education, maintenance, and support until they reach the age of 25, at which point the capital will be distributed to them equally.

In another scenario, imagine a business owner, Sarah, who wishes to set aside shares in her company for the future benefit of her employees as part of an employee share scheme. The shares are placed in an express trust, with the company’s legal advisor and HR manager named as trustees. The trust deed outlines their responsibilities, including the timeline and criteria under which the employees would be entitled to benefit from the shares such as length of service or performance targets.

These examples illustrate how express trusts can be tailored to a wide range of personal, family, or business circumstances, ensuring that assets are protected, managed, and distributed according to the settlor’s specific wishes.

Understanding the concept of express trusts is pivotal in the British legal system as it provides a flexible and secure method for asset management and succession planning. It underpins a significant portion of wealth transfer processes and reflects the legal recognition of private autonomy in managing one’s affairs. Notably, the application of trusts extends beyond personal estates to include charitable, commercial, and international financial transactions, playing a central role in the infrastructure of modern financial and legal practice in Britain.

This website is for informational purposes only and may contain inaccuracies. It should not be used as a substitute for professional legal advice.