An Example Memorandum on a Trust Deed

July 31, 2017 Religion


From: ( Associates )

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

To: ( Partner )

Rhenium: Betty Bennett’s Trust Deed

Date: January 09, 2013

I. Introduction

The memoranda is prepared for the meeting with Betty Bennett, a client who intends to put up a trust for the public assistance of her grandchildren. In the undermentioned analysis, each proviso in the proposed trust title is discussed in order to place legal issues and jobs which need to be solved or avoided. The relevant suggestions are provided, and other considerations which include inquiries and issues to be clarified are besides given in the memoranda.


1. Provision 1

A valid express trust is required to fulfill the “the three certainties” which are the certainty of purpose, certainty of subject-matter and certainty of objects. [ 1 ] To set up a lawfully effectual trust for Ms Bennett, it must be shown that the client has the purpose to make a trust ( but non a gift or loan ) , [ 2 ] and instantly reassign the belongings when the trust is ab initio executed. [ 3 ]

It is really clear from the diction of “upon creative activity of the trust” that the client has the purpose to set up a trust but non a gift or loan. However, in the first proviso of the drafted trust title, it is unsure when the trust title will be created and when the $ 1 million will be transferred to the trust history. Additionally, the proviso will be non lawfully enforceable to declare an purpose to set up a trust for future clip without considerations. [ 4 ] Therefore, the proviso is invalid and needs to be redrafted to alter the dictions to do certain that the trust belongings is instantly transferred at the beginning of the trust title.

For the demand of capable affair, the belongings transferred to the trust must be certain and identifiable. [ 5 ] The belongings that the client intends to be held on trust is $ 1million. As the capable affair of the current trust is hard currency from Ms Bennett’s personal belongings which is touchable, the belongings can be identified and defined. It can be suggested that the word “cash” should be incorporated into the proviso to avoid ambiguity.

An express trust is established wholly when the trust belongings is transferred to the legal guardians in the capacity of legal guardians. [ 6 ] It is extremely recommended to name the names of the legal guardians who are Cathy and Denis, and give the inside informations of the specific trust history set up for the intent of this peculiar trust in the proviso.

[ Recommended proviso ]

I, Betty Bennett, hereby assign $ 1 million in hard currency into the specific trust history in the name of the legal guardians, Cathy Chen and Denise Finkel, in their capacity as legal guardians. Detailss of the specific history.

  • Bank: Common Bank of Australia
  • Account No: 540128 12039494

2. Provision 2

The certainty of objects requires that a valid express trust should be created for the benefit of donees who must be identified. [ 7 ] As there is an duty to administer the trust assets every bit among all populating donees in Provision 5, it seems that the trust title is a fixed trust where the “list certainty” regulation applies which requires that all the donees must be identified or discoverable by the legal guardians at the clip of distribution. [ 8 ]

Although Edward can be easy identified as a beneficiary, there may be a possible issue in the proviso that may be challenged that whether the definition of “future children” includes any illicit kid of Cathy or Denise, and the kids from their hereafter matrimonies. Therefore, the existent purpose demands to be clarified and confirmed with the client. Furthermore, the diction of “might” used in the proviso lacks certainty of objects which may annul the proviso. Clarifications are required by the client.

The commissariats in a wholly constituted express trust must non pique against public policies. Despite the High Court determination inRamsay V Trustee Executors and Agency Co Ltd[ 9 ] which upheld that the donee who were perfectly entitled to the trust belongings when divorced with the current married woman did non conflict the populace policy, it has been good accepted and supported by recent governments that any trust prejudicial to the position of matrimony is null for the public policy grounds. [ 10 ]

It is ill-defined in the proviso whether the client is truly willing to except Denise’s kids related to Fred as donees. If it is the true purpose, every bit long as Denise remains the present matrimony with Fred, their kids is non entitled to have the trust assets. Therefore, the instructions from the client should be reconfirmed and Ms Bennett should be suggested that the proviso is really likely to be null due to the possibilities to do incentive to disassociate or marital strife.

[ Recommended proviso ]

The donees of the trust are Edward Chen, all future kids of Cathy Chen and Denise Finkel from legitimate matrimonies.


The donees of the trust are Edward Chen, all future kids of Cathy Chen and Denise Finkel regardless of matrimonial position.

3. Provision 3

A fiducial relationship exists when one party undertakes or Acts of the Apostless on behalf of another party in a peculiar circumstance where in the context of trust, legal guardians have fiducial duties to move for the best involvements of the donees. [ 11 ] In other words, a trust will non be if there is no fiducial relationship between the legal guardians and donees and the kernel of a trust is described as “an proprietor of belongings is obliged to use the belongings for another” . [ 12 ] Although most of the fiducial duties can be excluded by the trust instrument or obtaining the to the full informed consent of the donees, the duty to move good religion is a must for the being of a valid trust. [ 13 ]

In the proviso, it is obvious that the client wishes to relieve the legal guardians from any breach of fiducial duties. However, Ms Bennett should be advised that the trust will non valid if the legal guardians shall non be apt to the donees by sing the nature of a trust. It is extremely recommended that the diction of “liable” should be replaced, and this portion of the proviso should be redrafted to reflect “good faith” constituent in instance of any struggle between the legal guardians and donees while the diction of “except in instances of knowing pickings of trust funds” should be considered to be excessively narrow and unneeded and deleted from the proviso.

Under S59 ( 4 ) ofTrustee Actand common jurisprudence governments, [ 14 ] the legal guardian has a right of insurance to reimburse himself for disbursals which incurs in pull offing the trust belongings and dispatch the disbursal straight from the trust belongings. [ 15 ] The legal guardian may besides be entitled to have wage with the consent of allsui jurisdonees or express conferral through the trust instrument. [ 16 ] The trustees’ right of insurance is clearly expressed in the proviso but the contents of the proviso sing insurance right should integrate a restriction which ensures that that the disbursals are decently incurred. All the disbursals which are unreasonably incurred by legal guardians should non be reimbursed. Besides, the payment for trustees’ services mentioned in the proviso must be related to the executing of the trust. In add-on, there is another consideration that the client may be cognizant that the court’s bestowal is required if the legal guardians elect to put to death the right to remuneration as some donees may be under a legal age at that clip.

The insurance right may be extended to donees in some fortunes. Beneficiaries who benefit from the trust should be apt to the personal hazard unless it can be moderately believed that the legal guardian should be responsible for the load. [ 17 ] In the current proviso, because all the donees at the clip of executing of the trust are under legal age, baby or unborn, the donees are non be required to indemnify the legal guardian personally by using theHardoon[ 18 ] regulation. The hard state of affairs in the current trust title will originate when some of the beneficiary turns 18 and becomes an grownup lawfully. Since it is non really just to protect grownup donees in a trust which consists of both infant and big donees, [ 19 ] any donee who turns 18 will go apt for the load. Consequently, it may be held by the tribunal that the footings would annul the proviso. Therefore, the proviso should be besides redrafted to reflect the issue above and cover with grownup donees and infant beneficiary severally.

[ Recommended proviso ]

The legal guardians shall move in good religion to the donees on history of their actions as legal guardians. The legal guardians may have some payment for their services in relation to the executing of the trust and be reimbursed from the trust financess for disbursals decently and moderately incurred in pull offing the trust. The legal guardians will hold no right to claim financess straight from the donees who are under 18.

4. Provision 4

The trustee’s responsibilities are non merely sourced in the trust instrument but besides in legislative act and in equity. [ 20 ] The trustee’s responsibilities on investing of trust financess are mostly regulated by statutory commissariats. The current statute law provides a bifurcated criterion of prudence in investing depending on the professional properties of the legal guardian in inquiry. More is expected of a professional legal guardian than an unpaid household legal guardian. Under s 14A ofTrustee Act 1925( NSW ) , legal guardians, if he or she is non a professional legal guardian like legal guardians in proposed legal guardian, are required to exert diligence and accomplishment that a prudent individual would exert in pull offing the personal businesss of other individuals when exerting a power of investing.

Because current legislative act explicitly imposes responsibilities of prudent individual on the legal guardian for investing of trust financess, Ms Bennett’s drafted proviso that requires the legal guardian to try to put trust money providentially isunneeded. Furthermore, the current statute law requires the criterion of prudent individual in pull offing the personal businesss of other individuals. The criterion of prudent individual in pull offing the personal businesss of other individuals and the criterion of prudent individual in pull offing their ain personal businesss are different. However, Ms Bennett’s drafted proviso isequivocalabout which criterion is required. The criterion of attention imposed on a legal guardian can be altered by express footings in the trust instrument, but the express footings should non do ambiguousness.

Most,but non all, liability for breach of trust can be excluded by specific proviso in the trust instrument. [ 21 ] The Court of Appeal inArmitage V Nurse[ 22 ] held that a trustee’s liability for carelessness could be excluded, but it would pique public policy to let an freedom clause to except liability for existent fraud or dishonesty.

Ms Bennett’s drafted proviso that expressly exempts the trustee’s liability for the investing determinations can be interpreted to include any liability including existent fraud and dishonesty. Therefore, the drafted proviso can beinvalidbecause it is against public policy.

In drumhead, the drafted proviso 4 by Ms Bennett is debatable and it should be deleted.

[ Recommended proviso ]

( Delete )

5. Provision 5

There are regulations to restrict the continuance of private trusts. These are jointly known as the ‘rule against perpetuities’ . The regulation against sempiternities requires a temperament of belongings to enthrone with in certain period of clip. The trusts that infringed these regulations are null. Under s 7 ( 1 ) ofPerpetuities Act 1984( NSW ) , the sempiternities period is 80 old ages from the day of the month when the temperament takes consequence.

Ms Bennett’s drafted proviso provinces that the trust shall enthrone when the youngest beneficiary turns 18. Because the donees of the proposed trust are all future kids of Ms Bennett’s two girls, the youngest donee will technically be the last born kid of Ms Bennett’s two girls, either Cathy Chen or Denise Finkel. It is non clear whether Ms Bennett’s drafted proviso breaches the regulation against sempiternities doing the trust nothingness because it is non certain whether the last kid of either Cathy Chen or Denise Finkel can be born after 62 old ages from the day of the month of temperament to transcend 80 twelvemonth statutory sempiternity period. However, it is certain that Ms Bennett’s drafted provisocauses future troublesin doing the trust vested within in a certain period of clip because the legal guardians will hold troubles in make up one’s minding who the last kid of Cathy Chen or Denise Finkel will be.

In add-on, from Ms Bennett’s wants, it seems that she wants to supply benefits for her existing and future grandchildren from the proposed trust. However, under her drafted proviso, most of the donees will hold no benefits for a long clip until the youngest donee who is even unborn at the clip of the constitution of the trust reaches 18. It is dubious that Ms Bennett intended this state of affairs.

In drumhead, the drafted proviso 5 by Ms Bennett is debatable and it should be replaced by the recommended proviso below.

[ Recommended commissariats ]

The trust shall enthrone when the eldest beneficiary turns 18. At that clip, all staying trust assets will be distributed every bit among all life donees.


The trust shall enthrone when either the youngest beneficiary turns 18 or 80 old ages from the day of the month of this trust title, whichever is earlier. At that clip, all staying trust assets will be distributed every bit among all life donees.

III. Questionsand Other Considerations

1. Does Ms Bennett want to make an inter-vivos trust or a testamentary trust?

For the intent of the proposed trust, there are two methods available for making a trust. But Ms Bennett’s drafted commissariats do non stipulate which method she intends to utilize. One method is testamentary trusts and the other is inter vivos trusts. Ms Bennett has to make up one’s mind which method she prefers.

2. What does Ms Bennett mean by ‘children’ in the drafted proviso as donees?

As already discussed in II-2 above, the beneficiary must be certain. In other words, the donees of a trust must be identifiable. However, the word ‘children’ in Ms Bennett’s proposed commissariats makes the donees to be unsure because it is non clear whether the ‘children’ include the kids merely from legal matrimony or non. Therefore, Ms Bennett should make up one’s mind whether she wants to include kids merely from legal matrimony or non.

3. What is Ms Bennette’s intended enthroning period of the proposed trust?

As discussed in II-5 above, the proposed proviso 5 is debatable. Therefore, we proposed two versions of recommended commissariats. However, it would be more appropriate to understand what Ms Bennett’s intended enthroning period is.

4. How does Ms Bennett want to administer the income from investing of trust belongings?

The legal guardian is under a responsibility to put trust financess instead than to merely keep them safe. [ 23 ] Therefore, certain income will be by and large created from the trust belongings. However, Ms Bennett’s drafted commissariats do non teach the legal guardians how to cover with the income generated from the trust belongings. Ms Bennett should supply the relevant commissariats.

Recommended Provision

The legal guardians must roll up and retain the income generated from investing of trust belongings for the benefits of the donees. The accrued income will go trust assets and distributed every bit among all life donees at the clip of expiration of the trust.

1 | Page


I'm Amanda

Would you like to get a custom essay? How about receiving a customized one?

Check it out