The Law does not provide a comprehensive definition of ‘trusts’. Trusts Law was largely developed by the courts on a case-by-case basis.
It is the development of this case law which provides us with a better understanding that a trust arrangement entails:
a) an obligation on the holder of property (the “Trustee”)
b) to manage that property (the “Trust Property”)
c) for the benefit of another (the “Beneficiary”).
The legal title to the Trust Property is vested in the Trustee by its previous owner (the “Settlor”). The Trust Property is managed by the Trustee in accordance with the instructions of the Settlor. These instructions are usually written and expressed in a Trust Deed of will (the “Trust Instrument”). Furthermore, the instructions may also be oral.
The most important thing to note is that, even though the trustee has legal ownership of the trust property, it does not belong to him. Beneficial ownership of it belongs to the beneficiaries. So, the trust property, is an independent fund held by the trustee but available only to the beneficiaries.
For a valid Trust to be created, the following three certainties must be present:
a) Certainty of Intention – there must be evidence of the express intention of the Settler to create the Trust. This is usually evidenced by the Trust Instrument (although it is possible to have orally created trusts);
b) Certainty of Subject Matter –the assets that are to become the trust property must be identifiable, ie money, property, shares etc;
c) Certainty of Objects –the identity of all the intended beneficiaries of the trust must be ascertained or ascertainable at the time of setting up the trust