The three certainties which must be present for the creation of a valid trust are the certainty of intention to create a trust; the certainty of identity of the subject matter of the trust; and the certainty of the beneficiaries of the trust.
A trust will fail if no beneficiary may be identified for it by the trustee- Albert Cilia
The presence of each ‘certainty’ is a prerequisite for the creation of any trust.
The moment the property is transferred in trust it is important that the settlor intends to create a trust of the property being put in trust. The settlor’s intention may be manifested verbally or in writing, but in all cases it should be apparent to the person receiving the property that the property is being transferred to be held on trust for the benefit of others.
An important effect which flows from the principle that the trustee holds the trust property for the benefit of the beneficiaries is that the trust property is certain and identifiable and that trustee must hold the property as a separate and identifiable patrimony.
A trust in which the trust property is mixed with other property so that it is impossible to identify precisely which property is held on trust for the beneficiaries will be invalid. The law imposes a duty on the trustee to segregate trust assets from personal assets and the assets held on trust under other trusts. The only exception to this rule relates to the holding of identical assets otherwise known as fungibles.
It is a prerequisite of any trust that the trustee holds the property for the benefit of a beneficiary or beneficiaries. A trust will fail if no beneficiary may be identified for it by the trustee. The law requires that beneficiaries must be either “identifiable by name” or “ascertainable by reference to a class or to a relationship to person”.
The degree or level of certainty of the beneficiaries of a trust will largely depend on the terms of the trust. A fixed interest trust will usually contain a clear list of identifiable people; a discretionary trust will invariably allow the trustee discretion to chose one or more beneficiaries from a class of people.
Assuming that the three certainties are satisfied, a trust may come into “existence in any manner” whatsoever. Our law provides that without prejudice to this general rule “a trust may come into existence unilaterally or otherwise by oral declaration, or by an instrument in writing including by a will, by operation of law or by judicial decision”.
To ensure certainty of intention to create a trust, the law requires that if property is settled in trust orally, the settlor must manifest his intention clearly. In the absence of sufficient evidence of a clear intention to create a trust, the law contains a presumption that any property “held, acquired or received by a person for another on the basis of oral arrangements of a fiduciary nature, express or implied” is regulated by the law of mandate or deposit as the case may be.
Accordingly, unless it could be manifestly shown that the settlor intended to create an oral trust, our law will presume that the arrangement intended was one of mandate or deposit. The only exception to the rule that a trust may be created in any manner is the ‘unit trust’ which must be created by an instrument in writing. ‘Unit trusts’ are a very particular type of trust created as collective investment vehicles which must be licensed as such in terms of the Investment Services Act, 1994.
acilia@jmganado.com
Albert Cilia is the trust manager at Ganado Trustees & Fiduciaries Limited.