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An in-depth analysis of the certainty of objects in trusts, focusing on the obligation to distribute, discretion to select objects, and the tests for certainty in both fixed interest and discretionary trusts. It covers the concepts of list certainty and criterion certainty, as well as administrative unworkability and capriciousness. The document also discusses the difference between trust powers and mere powers.
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Typology: Summaries
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Pursuant to the beneficiary principle, a trust must be for the benefit of identifiable persons or objects (Morice). However, the test for certainty depends upon the type of trust created. Summary Obligation to Distribute Discretion to Select Objects Test for Certainty General Hybrid Special Fixed Interest Trust Yes No discretion permitted List Certainty Discretionary Trust Yes No No Yes Criterion Certainty Mere Power No Yes Yes Yes Criterion Certainty
ASK: Does the wording of the clause indicate that trustee is obliged to distribute property? If YES , then clause imposes a trust power If NO , then clause imposes a mere power I. TRUST POWER Look at whether there is time limit e.g. T must appoint to B within X years this indicates obligation Generally, will not have a gift over in default (although not conclusive) (Hays) Clear and express language e.g. “must”, “on trust” – compare to other sections To distribute to anyone except T also indicates that cannot keep it for themselves II. MERE/BARE POWER Weak language compared to other sections will likely indicate a mere power A gift over in default clause is conclusive evidence of a mere power (Hays) B. TYPES OF CLASS OF OBJECTS Here [CLAUSE #] grants [D] a [GENERAL/HYBRID/SPECIAL] power of appointment, to select to whom property is distribute from [CLASS OF OBJECTS].
Where there is a general or hybrid class of objects with an obligation to distribute the property, it will fail the class is simply too wide to allow the trust to be enforced (Re Carville) (Hays) Where certainty fails due to above, a resulting trust will be established in favour of estate As [D] is under an obligation to distribute the assets s/he has an exhaustive discretionary power and the test is criterion certainty. III. MERE DISCRETIONARY POWER As [D] has a mere POI the test for certainty of objects is criterion certainty (McPhail)
Fixed interest trusts = List Certainty Discretionary trusts = Criterion Certainty A. LIST CERTAINTY TEST: T must be able to make a list of all the beneficiaries, if this can’t occur, the trust will fail List is made at the time of distribution Shares to be taken may be specified on trust deed or necessarily implied B. CRITERION CERTAINTY TEST: T must be able to determine whether or not a person is within the class of objects