Classification Of Trusts

The means by which the different forms of trusts

come into existence.
 Thomas and Hudson, The Law of Trusts- ‘A trust
comes into existence either -
 by virtue of having been established expressly by a
person (the settlor) who was the absolute owner of
property before the creation of the trust (an express
trust); or
 by virtue of some action of the settlor which the court
interprets to have been sufficient to create a trust but
which the settlor himself did not know was a trust (an
implied trust); or
 by operation of law either to resolve some dispute as to
ownership of property where the creation of an express
trust has failed (an automatic resulting trust) or
 to recognise the proprietary rights of one who has
contributed to the purchase price of property (a purchase
price resulting trust); or

 by operation of law to prevent the legal owner of

property from seeking unconscionably to deny the rights
of those who have equitable interests in that property (a
constructive trust).’
 Thereare several ways in which trusts can be classified, all
of which have some value.

 By method of creation- Express/declared trusts, Implied /

Presumed Trust, Constructive trusts, and Statutory trusts.
 Resulting Trusts, Precatory Trusts, and Secret Trusts are
also the species of the above mentioned three classes.

 By type of beneficiary/ By object- Private trusts, and

Public trusts/Charitable trust.

 By nature of beneficiaries’ interest - Fixed trusts, and

Discretionary trusts
 According to the nature and duties of the trustees’ -
Simple trusts, and Special trusts.

 From the view point of supplying consideration -

Trusts for value, voluntary trusts, and trust of
imperfect obligations or illusory trust.

 All the above mentioned trust fall into two broad

categories- trust created by the act of parties and those
created by the operation of law.
Express Trust
 These trusts are the product of the express and expressed
intention of the settlor to create a trust.
 An express trust arises where a settlor deliberately and
consciously decides to create a trust, over their assets,
either now, or upon his or her later death. In these cases
this will be achieved by signing a trust instrument, which
will either be a will or a trust deed.
 Example-
 S, the holder of 900 shares in British Gas plc., declares
that the shares are held on trust for his son, B, absolutely.
S will become the trustee for the benefit of his son.
 This is one intentionally declared by the creator of a
trust who is known as the settler or if the trust is
created by a will, the testator. It is one that has been
created by the settler himself through the
manifestation of an intention to create one.
 The common ways of creation of an express trust are:
 By deed;
 By will; or;
 By word of mouth
 Express trusts are sometimes subdivided into executed trusts
and executory trusts.
 An executed trust is one in which the testator or Settler
has marked out in appropriate technical expressions what
interests are to be taken by all the beneficiaries.
 An executory trust is one where the settler has indicated to
his trustees a scheme of settlement but the details are to be
gathered from his general expressions. As such, the
execution of some further instrument is required to set out
the beneficial interest.  
 Once the property is indicated by the settler, the property
becomes subject to a valid trust but it remains executory
until a further instrument is duly executed.
 Where in the case of an executed trust the settler has made
use of technical expressions for which the law has laid
down rules of interpretation, equity will follow the law
and give effect to such interpretations.
 However in case of 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 of a final deed which gives effect to
such intention.
Implied Trusts
 These are trusts which court deduces from the conduct of the
parties and the circumstances of the transaction.
 Nottingham, L.C. in Cook v Fountain (1676) 3 Swans 585
 “There is one good, general and infallible rule that goes to
both kinds of Trust (express or implied), it is a rule that
never deceives and to which there is no exception and i.e. the
law never implies , the court never presumes a trust , but in
case of absolute necessity”.
 There are two categories of implied trusts to consider- Resulting Trust
and Constructive trust.
 Example- when A purchases land and conveys it to x, there is
prima facie an implied trust and x holds it as a trustee for A.
 An implied trust is one declared by a party not
directly, but only by implication;
 Example-
 Where a testator devises an estate to A and his heirs,
‘not doubting’ that he will there out pay an annuity of
20 pound per annum to B for his life, in which case A
is the trustee for B to the extent of the annuity.
 Trusts by operation of law are such as are not declared
by a party at all either directly or indirectly, but result
from the effect of a rule of equity.
Resulting Trust
 This type of trust comes into being when a settlor has set
up a trust but the beneficial interest (or part of it) results
or returns to the settlor.
 Example-
 If a settlor transfers property to trustees but fails to name
or describe the beneficiaries.
 If property is bought and conveyed into the name of
someone else.
 Again, if property which is owned is conveyed into the
name of another a resulting trust may arise.
 In both of these cases the person in whose
name the property stands holds it on resulting
trust for the purchaser or owner.
 In both of the examples in this paragraph a
resulting trust will exist unless it can be proved
that the transferor intended to make a gift to
the transferee.
 Many resulting trusts may also be argued to
arise as the result of the presumed intention of
the settlor and are described as implied trusts.
Examples of Resulting Trust
 Where property is conveyed upon trust but a trust is not
declared .
 Trust property is not completely exhausted.
 Trut fails- as it offends some rule of law.
 When beneficiaries are not specified at all .
 Where trust is for X’s maintainence and X dies without
spending anything.
Constructive Trust
 It is generally agreed that in the main these trusts are
imposed by the courts in response to fraudulent or
unconscionable conduct.
 They are imposed irrespective of the intention of the
trustee and in many cases it is clear that a trust was the
last thing that the trustee contemplated.

 Example-
 a constructive trust may arise if property is transferred
as the result of an individual exerting undue influence
over another.
 Clearly, the intention of the person obtaining the
property is to keep it for himself; nevertheless the court
is very likely to decide that he holds it on a constructive
trust for the person from whom the property was
obtained.

 Another example of a constructive trust arises where a

volunteer obtains trust property or trust property is sold
to a purchaser who has notice of the trust.

 In either case if the property was transferred in breach of

trust it will be held on constructive trusts for the
beneficiaries under the original trust.
Statutory trusts
 A number of statutes impose trusts. Perhaps the most
important examples of these statutory trusts arise in
the context of the 1925 property legislation.
 The Law of Property Act 1925 ss 34–36 imposed a
statutory trust for sale whenever land is co-owned.
 Also the Administration of Estates Act 1925, Sec.33
imposed a statutory trust for sale on the property of a
person dying intestate.
By types of beneficiary/ object
 Private trusts
 Most of the trusts discussed in the Indian Trust Act are
private trusts in that they are set up to benefit either a
single individual or a class of specified people.

 Public trusts
 These trusts are intended to benefit the public at large or at
least a section of it. One of the commonest examples of a
public trust is the charitable trust. One of the conditions
for validity as a charitable trust is that it bestows a benefit
on the public or a section of the public.
Discretionary trusts
 Under such a trust the trustees are given the discretion to
decide the extent to which beneficiaries are to benefit.
 Example-
 Sam may decide to transfer property to trustees to hold on
a discretionary trust for his two children, Bill and Ben,
giving the trustees the discretion to decide how Bill and
Ben are to benefit from the income and the capital of the
trust fund. Neither Bill nor Ben has any interest in the
trust property.
 A discretionary trust may be exhaustive or non-
exhaustive.
 Under an exhaustive trust the trustees are under an
obligation to distribute the trust property; their discretion
extends only to deciding which of the beneficiaries are to
benefit and the extent of their individual benefit.
 If the trust is a non-exhaustive trust the trustees also have
a discretion to decide how much of the trust property is to
be distributed as well as determining what is to be
allocated to which beneficiary.
According to trustees’ duties
Simple trusts
A simple or bare trust exists where the trustees have no active
duties to perform. The trustees are simply the holders of the
legal estate. An example of a simple trust is if property is
transferred into the name of a mere nominee for the ‘real’ or
beneficial owner.

Special trusts
These are trusts where the trustees do have positive active
duties to perform. Unlike the simple trust, the trustees have
a responsibility which goes beyond merely holding the legal
estate. This type of trust can be divided into ministerial and
discretionary trusts according to the duties which the
trustees have.
 If the trustees have merely routine, administrative
duties, such as the collection of rent from trust
property and holding it on a fixed trust, a ministerial
trust will exist.
 By contrast a discretionary trust will exist if the
trustee has to exercise his discretion or judgment in
fulfiling his duties.
 For example, a trust which requires the trustees to
make decisions as to whether or not to sell trust
property will be classed as a discretionary trust.
Precatory Trusts
 The word precatory is obtained from the latin root precarious
meaning entreaty and the English meaning is – that which
depends on the will or pleasure of another.
 No technical words are required to create a trust and the
question in each case would depend upon whether on the proper
construction of the words used, the settlor or testator has
manifested an intention to create a trust. However , no
expression or terms which are insufficient to express a definite
intention can create a trust. For example- I desire, will, request,
entreat, etc. are ineffectual.
 In the past the court of chancery seems to have been eager to
catch at any phrase which could possibly be twisted into an
expression of trust.
Secret Trust
 In a secret trust the settlor’s intention to create a trust is either
expressed in disregard of the formal requirements of the statute, or if
expressed with due regard to the formalities, it becomes ineffectual
ultimately at law.
 In such cases one makes a testamentary disposition without
observing those formalities which the law requires him to observe in
case of all such dispositions.
 Example- Fully Secret Trust
 If I make a devise to T, saying nothing of any trust, and I then make a
declaration that T is to hold it in trust for X, but this declaration is not
made with the formalities required by the Wills Act and is not
communicated to and assented to by T during my lifetime, then on
my death T will take the land beneficially, unburdened by any trust.
Trusts For Value
 Where consideration has been paid by the beneficiaries to
the settlor in order to bring a trust in existence, the resultant
trust is one for value.
 For example, A creates a trust in favour of B if she marries
A, marriage being a valuable consideration.
 Similarly a debtor creating a trust in favour of his creditors
for payments of their dues if they reduce these debts by 5
per cent the transaction results in trust of value.
 As Maitland expresses, in such cases formalities are of
minor importance, since if the transaction cannot take place
by way of “trust executed” it can be enforced as a contract
by the court of equity.
Voluntary Trusts
 A voluntary trust is also defined as an obligation arising
out of a personal confidence reposed in, and voluntarily
accepted by, one individual for the benefit of another. This
is in contrast to an involuntary trust, which is created by
law.
 No consideration is made in a voluntary trust. In a
voluntary trust, the recipient of the trust gives nothing in
exchange for the trust but receives it as a pure gift. This
distinguishes voluntary trusts from trusts for value, which
are trusts made in favor of purchasers and mortgagees.
Illusory trust
 Illusory trust refers to an arrangement that gives the
outward impression of being a trust, but is not in fact
so because of powers retained in the settlor.
 The apparent trustee has no power to deal with the
property of the trust. In illusory trusts the settlor
retains so much control that, in effect, no trust exists.
 Such trusts are also called trusts of imperfect
obligation.