Module 2: Trust Creation & Essential Elements

A settlor transfers property (the trust res) to a trustee, who holds legal title and manages it for the benefit of a beneficiary, who holds equitable title — a direct structural product of equity’s historical role, from Module 1, as the common law’s supplement.

The trust’s legal/equitable title split has a genuinely practical medieval origin. In the twelfth and thirteenth centuries, an English landowner departing for the Crusades — or Franciscan friars, whose religious vows barred them from owning property outright — would convey land to a trusted friend “to the use of” the departing owner or the friars themselves, letting the friend hold formal legal title while the real owner retained the practical benefit. The common law courts initially refused to recognize the beneficiary’s interest at all — as far as the common law was concerned, the legal titleholder simply owned the land, full stop, and could ignore the arrangement entirely if they chose to. The Court of Chancery stepped in specifically to enforce these “uses” against a legal titleholder who tried to renege, reasoning it would be unconscionable to let someone keep property they had only ever agreed to hold for another. That medieval “use” is the direct ancestor of the modern trust, and the same basic legal/equitable title split — one person holding formal ownership, another holding the real, protected benefit — survives essentially unchanged today.

Example. A parent transfers investment property to a trustee to manage for a child until adulthood — the trustee holds formal legal title and management power, while the child holds the real, equitable interest in the property’s value.

A valid trust requires certainty of intention (genuine, binding intent, not mere precatory language), certainty of subject matter (clearly identified trust property), and certainty of objects (identifiable beneficiaries).

This three-part test itself traces to Knight v. Knight (1840) 3 Beav 148, where Lord Langdale, sitting in the English Court of Chancery, was asked to determine whether a will’s language — instructing an heir to distribute property among family “in such manner as he shall deem best” — created a genuine, binding trust or merely an outright gift with a non-binding hope attached. Lord Langdale’s opinion distilled what had previously been a scattered, case-by-case body of precedent into the clean, three-part formula this section still teaches: words sufficiently imperative to show genuine intention, subject matter sufficiently certain, and objects sufficiently certain. Applying his own test, he found the will’s language too vague and discretionary to satisfy certainty of intention, so no binding trust arose. Knight v. Knight remains the reason nearly every modern trust-validity analysis, whether taught in England or the United States, still organizes itself around exactly these same three certainties, nearly two centuries later.

Example. “I hope my son will use this money for his education” likely fails certainty of intention; “I direct that this money be held in trust exclusively for my son’s education” likely satisfies it.

Recalling the Contract Law course’s Statute of Frauds coverage, a trust of land generally must be evidenced in writing, while many trusts of personal property can be created orally. A testamentary trust, created by will, must also satisfy the applicable will formalities.

A real, genuinely interesting exception to strict will formalities is the secret trust doctrine, illustrated in Ottaway v. Norman [1972] Ch 698. A testator left his house outright to his housekeeper in a validly executed will, with nothing in the will itself mentioning any trust — but he had privately told the housekeeper, and she had orally agreed, that she would leave the house to his son upon her own death. When she instead left the house to someone else in her own will, the son sued to enforce the original private understanding, even though it appeared nowhere in the testator’s own validly executed will. The English court enforced it anyway, holding that equity will not let the Wills Act’s own formal requirements become an instrument of fraud — where a testator makes an outright gift on a will beneficiary’s private, accepted promise to hold the property for someone else, equity imposes a trust on the beneficiary’s conscience regardless of the will’s own silence on the arrangement. Secret trusts are a real, practical illustration of equity still doing exactly what it has always done: preventing formal legal rules from being twisted into a tool for genuine unfairness.

Example. An oral declaration creating a trust over a valuable painting might be valid; an oral declaration alone purporting to create a trust over real estate generally wouldn’t satisfy the writing requirement.

An express private trust is the standard, voluntarily created trust for identified individual beneficiaries — satisfying all three certainties and any applicable formalities is what makes it valid.

Why a private trust specifically needs identifiable beneficiaries — the beneficiary principle — was established in Morice v. Bishop of Durham (1804) 9 Ves 399. A testator left property to the Bishop of Durham to apply toward “such objects of benevolence and liberality as the Bishop shall most approve,” without naming any specific charitable purpose or identifiable beneficiary at all. The Court of Chancery, in an opinion by Sir William Grant, held the trust failed, reasoning that a private trust needs someone with a genuine, enforceable interest capable of going to court to hold the trustee accountable — without an identifiable beneficiary (or, as the next section covers, a recognized charitable purpose the state itself can enforce through the Attorney General), there is simply no one with standing to make sure the trustee actually does what the trust requires. Morice v. Bishop of Durham is the direct reason this section requires identifiable beneficiaries for a private trust to be valid — the requirement isn’t a technicality, it’s what makes the trust genuinely enforceable in the first place.

Example. A settlor who clearly, intentionally transfers a defined fund to a named trustee for the benefit of named grandchildren has created a straightforward, valid express private trust.

A charitable trust needs a recognized charitable purpose benefiting the public or a sufficient section of it — unlike a private trust, it doesn’t need ascertainable individual beneficiaries. If the original purpose becomes impossible, the cy pres doctrine can redirect the trust to the nearest possible charitable purpose instead of letting it fail.

Jackson v. Phillips, 96 Mass. 539 (1867), remains one of American law’s most historically striking cy pres applications. A Massachusetts abolitionist had left a substantial trust fund specifically dedicated to creating anti-slavery tracts and lecturers to promote the abolition of slavery, but by the time the case reached the Massachusetts Supreme Judicial Court, the Thirteenth Amendment had already abolished slavery nationwide — the trust’s specific original purpose was now impossible to fulfill in any meaningful sense. Rather than letting the substantial fund fail entirely and revert elsewhere, the court applied cy pres, redirecting the trust to closely related purposes still consistent with the settlor’s underlying charitable intent: educating and improving the condition of formerly enslaved African Americans. The case remains a genuinely vivid illustration of cy pres’s real practical value — even a historically significant, once-vital charitable purpose can become obsolete, and cy pres exists precisely to preserve a settlor’s underlying charitable spirit rather than letting an entire fund simply lapse the moment its original, literal purpose is achieved or rendered moot.

Example. A trust funding a now-obsolete disease-specific hospital ward might, under cy pres, be redirected to fund related modern medical research instead of simply failing.

A resulting trust arises by operation of law, without any express declaration, typically when an express trust doesn’t fully dispose of the property — the property generally “results back” to the settlor or their estate.

Vandervell v. Inland Revenue Commissioners [1967] 2 AC 291 shows a resulting trust arising from a genuinely sophisticated, high-stakes tax transaction rather than a simple drafting gap. A wealthy businessman, Tony Vandervell, tried to donate shares in his company to the Royal College of Surgeons in a way designed to minimize his own tax liability, structuring the transfer through an option his own trustee company could later exercise to reacquire the shares. The House of Lords held that because Vandervell never clearly specified who would beneficially own the shares if and when the option was exercised, the beneficial interest in that outcome automatically resulted back to Vandervell himself by operation of law — with real, painful tax consequences, since he was then treated as still beneficially owning income he had believed he had successfully given away. The case is a genuinely useful, high-stakes illustration of this section’s core point: equity does not tolerate a genuine gap in beneficial ownership — property can never simply float without anyone holding its real, equitable benefit, so an incomplete disposition automatically snaps back to whoever last clearly held it.

Example. A trust directing income to a beneficiary for life, with no instructions for the principal after death, generally leaves that leftover principal subject to a resulting trust back to the settlor’s estate.

A constructive trust is an equitable remedy courts impose to prevent unjust enrichment, regardless of the parties’ actual intent — often used where someone wrongfully acquires or holds property that in good conscience should belong to another.

Example. A fiduciary who secretly profits from a breach of duty might be held to hold those profits on constructive trust for the person they owed the duty to — not because anyone intended to create a trust, but because equity imposes one as a remedy.

The constructive trust’s foundational case, and the source of trust law’s famously strict “no profit” rule for fiduciaries, is Keech v. Sandford (1726) Sel Cas Ch 61. A trustee held a lease of a market on behalf of a minor beneficiary; when the lease came up for renewal, the landlord refused to renew it in the minor’s name (children could not, at the time, hold certain leaseholds directly), so the trustee renewed the lease in his own name instead, genuinely believing he had done nothing wrong since the minor simply couldn’t have obtained the renewal any other way. The Court of Chancery held the trustee must hold the renewed lease on constructive trust for the minor anyway, reasoning that allowing a trustee to keep any personal benefit obtained through their position — even one the beneficiary genuinely couldn’t have obtained directly — would create too great a temptation for trustees generally to put their own interests ahead of their beneficiaries’. Keech v. Sandford’s strict, almost unforgiving rule (no inquiry into the trustee’s good faith, no matter how genuinely blameless the trustee’s own conduct seemed) remains the doctrinal root of why courts impose constructive trusts on fiduciaries who profit from their position today, nearly three centuries later.