Professional Documents
Culture Documents
Classification of Trust
Classification of Trust
.Department of Law
CLASSFICATION OF TRUST
NASIR ZAMAN
LLB VIII
Table of Contents
Abstract…………………………………………………………………….03
Introduction……..…………………………………………………………04
Background………………………………………………………………..05
Principles…………………………………………………………………..08
a. Express Trusts……..………………………….……………………10
b. Non-express Trusts…………….……………...……………...........13
i. Constructive Trust……...………………………...………13
i. Charitable Trust………….……………………………….18
Conclusion…………………………………………………………………27
Selected Bibliography.…………….…………………………..…………..28
3
Abstract:
The following assignment will discuss trust thoroughly. It’s background, relation to
equity, benefits etc. will be discussed in detail with credible references and citations.
Most importantly, various classifications of trust will be analyzed and examined in detail. Various
jurists and legal scholars have presented different types of trust. Those classifications which are
commonly mentioned by prominent writers will be discussed in detail with help of relevant
Other types of trust which vary from jurist to jurist will be discussed in a concised manner at the
end.
4
Introduction:
Trusts are of many types and provide different functions like financial support,
In its simplest form, a trust is a legal relationship in which one party holds property for the benefit
of another.1
Many legal writers have given definitions and further explained trust. Snell’s Equity begins its
commentary on trusts with the words ‘No one has yet succeeded in giving an entirely satisfactory
definition of a trust (Snell Equity (30th edn, 2000) para 6-01). It proceeds, however, to say
‘perhaps the most satisfactory definition is that of Professors Sheridan and Keeton’:
“A trust is the relationship which arises wherever a person (called the trustee) is compelled in
equity to hold property, whether real or personal, and whether by legal or equitable title, for the
benefit of some persons (of whom he may be one and who are termed beneficiaries) or for some
object permitted by law, in such a way that the real benefit of the property accrues, not to the
trustees, but to the beneficiaries or other objects of the trust.”(Keeton and Sheridan The Law of
1
‘DEFINE THE THREE TYPES OF TRUSTS’ (The Lawyers & Jurists) < https://www.lawyersnjurists.com/article/define-
the-three-types-of-trust/ > accessed on 28th April 2020.
2
‘Trusts and Trustees’ (LEXBIBLIO) <http://www.lexbiblio.co.uk/free-legal-guides/trusts-and-trustees/ > accessed
on 26th April 2020.
5
Interpretation clause of Trust Act, 1882 which is applied in Pakistan elaborates trust as:
“A “trust” is an obligation annexed to the ownership of property, and rising out of a confidence
reposed in and accepted by the owner, or declared and accepted by him, for the benefit of
“A right of property, real or personal, held by one party for the benefit of another”.4
3
Trust Act 1882, s 3.
4
HENRY CAMPBELL BLACK, Black’s Law Dictionary (first published 1891, West Publishing Co. 1968)1680.
6
Background:
Some historians believe that it was first found in ancient Roman and Greek law.
People about to die used to trust their friends to look after their property in favor of their wife
But once England’s legal system drifted away from Roman law, it introduced trust to the world
Many historians believe that origin of ‘trust’ can be traced back to medieval England when
warlords who were off to fight wars had to leave their property at the disposal of some other
person who could take care of such property and execute their will according to their desires. 7
Many returning crusaders during 12th century and after that were directed by the King to go to
Court of Chancery to solve disputes related to trust in the following decades and centuries. 8
Therefore, it should be no surprise that law of trust mainly developed in Court of Chancery and
not common law Courts, which consequently makes trust a part of law of equity.9
5
‘History of the Trust’ (Lexon Incorporations BV) < https://lexcorp.com/en/trust/history/ > accessed 26th April
2020.
6
Ditto.
7
Ditto.
8
Craig R. Hersch, ‘A History of Trusts’ (The Sheppard Law Firm) <https://www.sbshlaw.com/a-history-of-trusts/ >
accessed 26th April 2020.
9
Howard K Insall and Gino Dal Pont, ‘Trusts: an historical introduction’ (Find Law Australia) <
https://www.findlaw.com.au/articles/34/trusts-an-historical-introduction.aspx > accessed 26th April 2020.
7
For instance, an early statute, the Statute of Mortmain,10 prohibited the granting of land to
religious houses without the payment of a fee. For avoiding payment of the fee, the land was
granted to a person, A, on the basis that it would be held for the benefit of the religious place
and not for A's benefit. The courts of law recognized only the fact that land had been legally
conveyed to A. Thus, according to law (in the common law courts) A could do what he or she
liked with the land (such as sell it and retain the proceeds) without regard to the obligation to
hold the house for the benefit of the religious property. The Court of Chancery, however,
enforced the obligation. While not denying that A had the legal title to the land, the Court acted
in personam in compelling A to act in accordance with the true basis on which the land was held.
Thus the court would restrain A from selling the property if necessary.11
This is how Court of Chancery has facilitated and helped trust to evolve for so many past
centuries.
10
‘Edward I’ (Encyclopedia Britannica) <https://www.britannica.com/place/United-Kingdom/Edward-I-1272-
1307#ref482798 > accessed 26th April 2020.
11
Howard K Insall and Gino Dal Pont, ‘Trusts: an historical introduction’ (Find Law Australia) <
https://www.findlaw.com.au/articles/34/trusts-an-historical-introduction.aspx > accessed 26th April 2020.
8
Principles:
As mentioned before, trust can be traced back to many centuries and for regulating
it, important principles have been developed throughout this duration. Most important of these
a. Certainty of intention:
settlor (person making the settlement) truly wants to place his property into trust. This
intention can be either expressly stated or written, or it can be inferred from surrounding
circumstances as well.12
be determined from the terms and conditions of the trust. It is very much appreciated in
simpler cases that property which is to be given in trust is fully mentioned in detail along with
a description of it’s physical existence at the time of creation of trust’s terms and conditions.
c. Certainty of objects:
terms of the trust. The identification may be as to specific person(s) known as fixed trust
12
‘Trust – Legal principles and common uses’ (Invesco Trimark – Tax & Estate)
<http://www.vfswealth.com/trusts_legal_principles.pdf > accessed on 29th April 2020.
9
If a list of all the beneficiaries/objects cannot be compiled, the trust will be void for
uncertainty.
➢ IRC v Broadway Cottages [1955]: the trust in this case failed because they could not
13
‘Certainty of Objects’ (Digestible Notes) <https://digestiblenotes.com/law/trusts/certainty_of_objects.php >
accessed on 29th April 2020.
10
Many jurists and legal thinkers have given various types of trust according to their understanding
of diversity and circumstances of cases under it. Some of these are, however, more significant
than others and are cited more frequently though they may overlap each other occasionally.
Express Trust:
To put it simply, an express trust is a trust created on purpose and not imposed
by a Court.14 Express trust responds to the intention of settlor. Without knowing this certain
intention, no express trust can be formed.15 Common ways of creating an express trust are by
According to Samantha Hepburn, professor of Law in Deakin Law School, Australia, there are two
i. The express trust by transfer in which the settlor decides to create trust by
such situation the settlor has to transfer property to this third party trustee validly.
14
‘What is an Express Trust?’ (All Law) <https://www.alllaw.com/articles/nolo/wills-trusts/express-trust.html >
accessed 27th April 2020.
15
Paul Davies and Graham Virgo, Equity & Trusts_Text, Cases and Materials (Online Resource Centre (Oxford)
2012)100.
16
‘Classification of Trusts’ (NISH’S LAW SCHOOL GUIDE)
<http://lawschoolguide.blogspot.com/2011/03/classification-of-trusts.html > accessed 27th April 2020.
11
ii. The express trust by declaration in which a declaration of trust arises in which settlor
declares himself, through express intent and words, to be trustee for the benefit of
named beneficiary.17
i. Executed Trust:
are clearly defined and demarcated. The beneficiaries can enforce it without any
type of trust requires additional instructions and actions from the trustor for it’s
execution.19
In executory trusts, equity will attach less importance to the use or omission of
technical words but will seek to discover the settler’s true intention and order the preparation
17
Samantha Hepburn, Principles of Equity and Trust (first published 1997, Cavendish publishing (Australia) Pty
Limited 2001)266.
18
‘Executed trust’ (Business Dicitionary.com) <http://www.businessdictionary.com/definition/executed-
trust.html> accessed 27th April 2020.
19
‘Executory Trust’ (Business Dictionary.com) < http://www.businessdictionary.com/definition/executory-
trust.html > accessed on 29th April 2020.
20
Flavell’s Will Trusts [1969]1 WLR 445.
12
Executed trusts are governed by the legal rules of construction; on the other
21
‘Classification of Trusts’ (NISH’S LAW SCHOOL GUIDE)
<http://lawschoolguide.blogspot.com/2011/03/classification-of-trusts.html > accessed 27th April 2020.
13
Non-express trusts:
a. Constructive Trust:
Constructive trust is like any other express trust except for the fact
that it arises by operation of law without any regard to intention of the parties. This is unlike
Constructive trust mostly arises out of unconscionable or unreasonable conduct of either the
Once created, a constructive trust works like an express trust except for the fact that
It has been suggested that the constructive trust is a response to the defendant’s unjust
enrichment, but the better view is that the doctrine of unjust enrichment triggers only
Waters has noted that the constructive trust is ‘a convenient and available language medium
22
Paul Davies and Graham Virgo, Equity & Trusts_Text, Cases and Materials (Online Resource Centre (Oxford)
2012)338-339.
23
Samantha Hepburn, Principles of Equity and Trust (first published 1997, Cavendish publishing (Australia) Pty
Limited 2001)399.
14
of trust which shows all important features of it like trustee, beneficiaries etc., making it seem
like express trust and resulting trust except for it’s mode of creation.
But on the other hand, Court allows it’s implementation based on the facts and circumstances
of the trust which justify it’s implementation. The Court in such situations does not create the
Although both these purposes collide with each other, but this dichotomy explicitly elaborates
concept of the constructive trust (Pettkus v Becker (1980)). This means that
proprietary forms of relief. Liberating the trust in this way confers greater
24
Samantha Hepburn, Principles of Equity and Trust (first published 1997, Cavendish publishing (Australia) Pty
Limited 2001)399.
25
Ditto page 400.
15
b. Resulting Trust:
has been created, or should have been created, but is incomplete.26 It is said that if scope of
express and constructive trusts is broadened, resulting trust’s scope will be minimized.
Nevertheless resulting trust has it’s own identity and gives voice to the intention of a settlor
The term ‘resulting trust’ is derived from the Latin verb ‘resalire’,
which means ‘to jump back’: the beneficial interest is thought to ‘jump back’ to A. However, Birk’s
“There is a continuing debate as to whether the idea of ‘jumping back’ in the Latin resalire is
anything more than a misleading metaphor. It may be more accurate to say that the interest
jumps up in the person beneficially entitled rather than back to him, or that it is in him from the
26
Samantha Hepburn, Principles of Equity and Trust (first published 1997, Cavendish publishing (Australia) Pty
Limited 2001)391.
27
Paul Davies and Graham Virgo, Equity & Trusts_Text, Cases and Materials (Online Resource Centre (Oxford) 2012)
371.
16
Principle Categories:
i. Automatic resulting trusts arise where an express trust fails in the beginning or on a
subsequent stage. The property is then held by the trustee for the settlor.
ii. Presumed resulting trusts arise where a person voluntarily transfers property for no
that there are traditionally two categories of resulting trust, but argued that both could be
28
[1996] AC 669, 708.
29
Paul Davies and Graham Virgo, Equity & Trusts_Text, Cases and Materials (Online Resource Centre (Oxford) 2012)
371.
17
for the families. This is done by a will or deed of trust. The settlor places his property by virtue of
such will or trust deed to provide for his family after he is dead.
Trustee(s) can be chosen either from the family or can be a professional who can invest trust
money in such a way that will allow them to make regular payments to survivors of the deceased.
In some situations, when a child (or children) of the deceased are minor, Court can make a trust
30
"trust." Encyclopædia Britannica Ultimate Reference Suite. Chicago: Encyclopædia Britannica, 2012. CD version.
18
Public trusts:
Public express trusts are created to benefit larger numbers of people, or, at least,
are created with wider benefits in mind. The most common public trusts are charitable trusts,
relieve the effects of poverty and other misfortunes. Such trusts are recognized for their
beneficial social impact and are given certain privileges, such as tax exemption.
Other public trusts are not considered charitable and are not so privileged. These include holdings
for public groups with a common interest, such as a political party, a professional association, or
Public trust is divided into charitable and non-charitable trusts which will be
Charitable Trusts:
These are the most prominent types of public trusts. Charitable trusts help us
in managing religious and educational trusts along with reducing poverty and effects of other
unfortunate events like natural disasters etc. Such trusts are very significant and their role in
society is so important that it is accepted by the respective States in which these are established
A trust will become a charitable trust only when it is established for a purpose which is
31
‘Trust Law’(Encyclopedia Britannica) < https://www.britannica.com/topic/trust-law#ref269749 > accessed on
29th April 2020.
32
"trust." Encyclopædia Britannica Ultimate Reference Suite. Chicago: Encyclopædia Britannica, 2012. CD version.
19
relationship between the person establishing the trust and the group of public which is getting
benefit from it, i.e. trusts should be set up for purposes rather than particular group of people. A
Rules regarding certainty of intent for establishing public charitable trusts are much more flexible
i. Perpetuity period:
Once the vesting rules for perpetuity have been satisfied, there is
should be lawful and should precisely follow rules and regulations regarding
advantages, particularly with respect to income tax and rating relief. Modern
33
Paul Davies and Graham Virgo, Equity & Trusts_Text, Cases and Materials (Online Resource Centre (Oxford)
2012)202.
34
Ditto.
20
Advantages of creating charitable trusts include but are not limited to having a
perpetual duration; it is entitled to favorable tax reliefs along with reputational benefits which
35
Samantha Hepburn, Principles of Equity and Trust (first published 1997, Cavendish publishing (Australia) Pty
Limited 2001)377 & 378.
36
The Independent Schools Council v The Charity Commission for England and Wales. [2011] UKUT 421 (TCC);
[2012] Ch 214, [14] .
21
Non-charitable Trusts:
(directly or indirectly) benefiting certain individuals. Otherwise such trusts are generally void in
which there are no ascertainable beneficiaries.37Furthermore it is also very important that the
Due to these reasons there has been a great deal of reluctance among judges regarding cases in
which clarification is required regarding non-charitable trusts. Though this trend is changing now
and some trusts which were seen as invalid are no longer in this category.
For example, trusts for adult amateur sport were once regarded as
non-charitable and void in England, but today this is a recognized charitable purpose after
regarded as generally void yet this argument lacks any rationality. This is because once the
purpose is clearly defined and although there are no certain beneficiaries, but if the trustees are
willing to perform the trust, there is no issue of enforceability. The trustees might still fail to
comply with the terms of the trust and misapply the trust property, but those who are entitled
to the trust property if the trust were to fail could seek to enforce the trust if they wish to do so.
37
Paul Davies and Graham Virgo, Equity & Trusts_Text, Cases and Materials (Online Resource Centre (Oxford)
2012)300.
38
Ditto.
22
The settlor or testator can also appoint a third party to enforce the trust if it seems necessary.39
This line of argument was accepted by Herman J in Re Shaw’s case ([1957] 1 WLR 729,
745) as:
‘’ The principle has been recently restated by Roxburgh J in Re Astor’s Settlement Trusts [1952] Ch
534, where the authorities are elaborately reviewed. An object cannot complain to the court,
which therefore cannot control the trust, and, therefore, will not allow it to continue. I must
confess that I feel some reluctance to come to this conclusion. I agree at once that, if the persons
to take in remainder are unascertainable, the court is deprived of any means of controlling such
a trust, but if, as here, the persons taking the ultimate residue are ascertained, I do not feel the
force of this objection. They are entitled to the estate except in so far as it has been devoted to
the indicated purposes, and in so far as it is not devoted to those purposes, the money being spent
is the money of the residuary legatees of the ultimate remaindermen, and they can come to the
court and sue the executor for a devastavit, or the trustee for a breach of trust, and thus, though
not themselves interested in the purposes, enable the court indirectly to control them. This line of
39
Paul Davies and Graham Virgo, Equity & Trusts_Text, Cases and Materials (Online Resource Centre (Oxford)
2012)302.
40
Ditto, p.303.
23
been opined from different legal thinkers and scholars based on their understanding. Those
which are used more widely have been discussed and detail above. While some of those which
a. Inter-Vivos Trust:
This is also known as living trust. Inter vivos (living) trusts are created
while an individual is still alive in order to name the beneficiaries of property and assets upon
death.41 This trust provides a way to plan an estate that can own assets during trustor’s lifetime.
While the trustor is alive, inter-vivos trust is revocable and any provisions in it can be changed.
Main advantage of such trust is that it helps avoid probate, which is a process by help of which
A trust that cannot be revoked and that takes effect during the
life of the grantor. Usually made to transfer wealth, protect assets, or reduce taxes. The estate
given in property is thus separated from grantor’s other taxable estate. So any estate given by a
41
Melissa Horton, ‘Inter Vivos Trust vs. Testamentary Trust: What's the Difference?’ (Investopedia, 30th August
2019) < https://www.investopedia.com/ask/answers/062515/what-difference-between-intervivos-trust-and-
testamentary-trust.asp > accessed 28th April 2020.
42
Julia Kagan, ‘Inte-Vivos Trust Definition’ (Investopedia, April 26th 2019)
<https://www.investopedia.com/terms/i/intervivostrust.asp > accessed on 28th April 2020.
24
person under this type of trust will be completely cut off from any legal proceedings against
Terms and conditions within the trust cannot be terminated or amended by the grantor without
the permission of beneficiary or beneficiaries he has named in such trust. Once the ownership of
assets has been transferred to the trust, the grantor has no right whatsoever to modify it. 43
c. Active Trust:
Also called special trust. In an active trust the trustee has to ensure more
active participation than in any normal trust for the benefit of the beneficiary.44 Other particular
duties to be performed in an active trust include investing money, passing on profits, rents etc.45
d. Testamentary Trust:
Also called will trust. This is an irrevocable trust created during the
life of the grantor, but that takes effect at the grantor’s death. Usually made as part of a will –
for example, a child’s trust made to name a trustee for property left to a minor. A will can contain
Testamentary trust usually has three parties involved in it, i.e. the trustor or grantor, the trustee
who manages the property and the beneficiaries. After the grantor’s death, the will must go
through the probate process to determine its authenticity. The trust then goes into effect, and
43
Julia Kagan, ‘Irrevocable Trust’ (Investopedia, April 5th 2019)
<https://www.investopedia.com/terms/i/irrevocabletrust.asp . > accessed on 28th April 2020.
44
Julia Kagan, ‘Active Trust’ (Investopedia, January 9, 2020) <https://www.investopedia.com/terms/a/active-
trust.asp > accessed on 28th April 2020.
45
‘Active Trust’ (Cambridge Dictionary) <https://dictionary.cambridge.org/dictionary/english/active-trust >
accessed on 28th April 2020.
46
Julia Kagan, ‘Testamentary Trust’ (Investopedia, September11, 2019)
<https://www.investopedia.com/terms/t/testamentarytrust.asp > accessed on 28th April 2020.
25
express trust exceeds what was expected or intended to be the purpose by the settlor, or when
some part of the property remains even after the trust has ended. After this the Court steps in
and orders establishment of a resulting trust for the settlor or his/her successors.
For example, if person A, forms a trust for the benefit of person B during his lifetime and the
terms and conditions of such trust mentions nothing about where trust’s benefits will go after B
dies, a resulting trust can be formed for A (the trustor) or his successors by the Court so that they
but directs the seller to transfer the property and its title to another. It arises when a property is
purchased with title in the name of one person but using the money of another. In a purchase-
money resulting trust the buyer is the beneficiary, and the holder is the trustee.48
47
Dennis R. Hower and Peter Kahn: Wills, Trusts and Estates Administration (7th edition, Cengage Learning
2011)289.
48
‘Purchase-money Resulting Trust Law and Legal Definition’ (USLEGAL.com)
<https://definitions.uslegal.com/p/purchase-money-resulting-trust/ > accessed on 28th April 2020.
26
The leading case in this regard is Nishi v. Rascal Trucking Ltd., 2013 SCC 33 where
“A purchase money resulting trust arises when a person advances to funds to contribute to the
price of property, but does not take legal title to that property. Where the person advancing the
funds is unrelated to the person taking title, the law presumes that the parties intended for the
person who advanced the funds to hold a beneficial interest in the property in proportion to that
g. Totten Trust:
Under this type of trust, money is placed in a bank account with the
instruction that when the settlor dies, all of it will be passed to a named beneficiary.50 Such type
of account is merely a payable on death (POD) bank account in which you name a beneficiary
This type of trust is often recommended by legal counsels for avoiding probate court
proceedings.51
49
Nishi v. Rascal Trucking Ltd., 2013 SCC 33.
50
‘Totten Trust Definition’ (Duhaime’s Law Dictionary)
<http://www.duhaime.org/LegalDictionary/T/TottenTrust.aspx > accessed on 28th April 2020.
51
Mary Randolph, ‘What Is a Totten Trust?’ (NOLO Legal Encyclopedia) < https://www.nolo.com/legal-
encyclopedia/what-is-totten-trrust.html > accessed on 28th April 2020.
27
Conclusion:
To sum it up, trust can be classified into various types of trusts as mentioned above
for meeting different ends and purposes. This topic of classification is so large that it is difficult
Nevertheless, it is a very important concept when studied under the concept of equity or even
SELECTED BIBLIOGRAPHY
Books:
1. Hower, R, Dennis and Peter Kahn: Wills, Trusts and Estates Administration (7th edition,
Cengage Learning 2011).
2. Davies, Paul and Virgo, Graham: Equity & Trusts_Text, Cases and Materials (Online
Resource Centre (Oxford) 2012) 371. (Retrieved from pdf drive.com)
3. Hepburn, Samantha, Principles of Equity and Trust (first published 1997, Cavendish
publishing (Australia) Pty Limited 2001). Retrieved from pdf drive.com
Encyclopedias:
Internet Articles: