Trust Basics – The Three Certainties
In our fast paced and busy lives, we can often overlook the basics, getting bogged down in the details and not seeing the forest for the trees. Seeing as this is the case, I thought it might be a good exercise to have a quick review of one of the basic tenants of trust law; the three certainties.
Most people are fairly comfortable with a basic understanding of what constitutes a trust. The loose idea that a trust is created when a person transfers property to another person under the instructions and understanding that the property is to be used for the benefit of a third party is fairly universally understood. But what may not be as universally understood are the basic criteria that must be met in order to have the transfer of property constitute a valid trust. In order for the property transfer to constitute a valid trust, it must meet what are known as the three certainties: (i) The Certainty of Intention; (ii) The Certainty of Subject Matter; and (iii) The Certainty of Objects.
The Certainty of Intention refers to the intention on the part of the person transferring the property (more correctly referred to as the "Settlor") to create a trust. The expression of the intention to create a trust can be oral or written, and should be supported by some expression of the intent to create a trust. Put simply, when the Settlor transferred the property, they had to do so with the intention that the property be held in trust for a third party.
The Certainty of Subject Matter has two aspects to it, being: (i) the certainty of the property that is subject to the obligation that it be held in trust; and (ii) the certainty of the amount, or share, of the trust property that each beneficiary is to receive. At the time that the property is transferred, it must be certain what property is to form the subject of the trust, and you must know how much each beneficiary of the trust is entitled to receive.
The Certainty of Objects refers to the fact that you must be certain who the beneficiaries of the trust are. For a trust to be valid, the trustee must know who they are to direct the benefits of the trust property towards, and who can hold the trustee to account in the event of anything going wrong. As such, a group so large or so vague that the trustee would unable to identify who the beneficiaries are would not be valid. The Objects have to be easily ascertainable and identified in order to be a valid trust.
If an alleged trust lacks any one of the three certainties it will fail as a trust. As such, when approaching a trust for the first time, a good practice tip is to quickly run through the three certainties to make sure that the trust is valid in its most basic form. Why waste hours on a more minute detail, only to realize that the trust was not valid from the start as a result of its objects being too vague. I hope this review of one of the basic tenants of trust law has provided you with a valuable refresher. Sometimes a review of the basics does us all a little good
Ian Hull – Click here for more information on Ian Hull.