Certainty requirements in the law of trusts

Abstract

Introduction All dispositions that are intended to transfer property, such as contracts, gifts, trusts and wills must be clearly defined if they are to be legally effective. In the event of a dispute a court may have to ascertain whether the property owner intended to dispose of her property and, if so, on what terms. In some cases the court may have to determine the identity, or identities, of the recipients of the property, or the quantum of property transferred. A recipient of property will need to know if the transfer constitutes a gift, a loan or a trust. All trusts, whether or not they also have to satisfy writing requirements, must be sufficiently certain in order to be enforceable. The certainty requirements for trusts are more demanding than for contracts because trusts can affect the rights of parties who did not agree to, or participate in, its creation. These parties may include the beneficiaries and third parties who do business with the trustee. An express trust must be certain in three distinct respects, sometimes called the ‘three certainties’. They are: (a) Certainty of intention. The settlor must have intended to create a trust of her property, as opposed to making a gift of it or lending it to another. (b) Certainty of subject-matter. The subject-matter of the trust must be specified with reasonable certainty. (c) Certainty of objects. The beneficiaries of the trust must be sufficiently identifiable. Charitable trusts are not required to satisfy the requirement of certainty of objects. They are discussed in chapter 17. Resulting and constructive trusts, which are not created by a settlor but are judicially imposed, will not satisfy the requirement of certainty of intention although the other two certainty requirements are still applicable to them. The certainty requirements are related to each other in the sense that failure to satisfy one of the certainties may cast doubt on whether one of the other requirements has been met. For example, if the subject-matter of a trust is uncertain it may well also be the case that the settlor did not truly intend to make the recipient of her property a trustee. Certainty of intention The settlor must have intended to create a trust of her property, as opposed to making a gift or a loan.