The trust may be created by deed, will, or contract, and if in real property cannot be enforced unless declared in writing by the party legally capable of declaring it; except resulting and constructive trusts.
Trusts in real property must be declared in writing, except constructive and resulting trusts. They need not be created in writing so long as a declaration follows. In that case the trust will be enforced from the time created. The form of declaration is immaterial so long as sufficient in substance. It may be found in letters, pleadings in litigated cases, etc. Usually of course, it is declared when created, as in wills, deeds, and the like.
The declaration must be by the one who can impress a trust upon the property, that is, the owner. Thus A conveys to B declaring the trusts. Or he conveys to B on trust but omitting the written declaration, depending on B's integrity. Now B is the only one who may declare the trust.
The declaration must be signed.
In every trust there must be certainty. The property affected must be certain, the person to be benefited must be certain, the use must be certain, though a discretion in the trustee is permissible; and there must be a trustee named or described and capable of identification.
Trusts cannot be created to offend the rule against perpetuities. The trust cannot be a perpetual one. There must be a vesting of the estate within the time provided in that rule. This, however, does not apply to charitable trusts, which may be perpetual.
A precatory trust is a trust inferred from the use of words of hope, confidence and the like.
A precatory trust is sometimes said to be an implied trust, but it is really an express trust, because it is expressed in the words used, though not directly and clearly. Thus suppose A leaves property by will to B "having full trust and confidence" that B will devote to certain uses for C's benefit. Has it been conveyed upon trust in the sense that B must perform the trust, or is that a matter left to his own discretion or sense of right ? The rule is that where words of hope, desire, confidence, etc., are used in this way there must really be an intent manifest from all the instrument to create a positive trust. The language though consisting in pleading or prayerful words, must be mandatory, and it must contain all of the elements of a trust, as certainty of party, certainty of property affected, certainty of purpose, etc.
A charitable trust is a trust for the benefit of the public at large or of some class of persons of the public.
A charitable trust is also called a public trust. It is a gift made in a charitable purpose to the public, or to some class of the public. as a gift to maintain a home for crippled children, to found a hospital, to endow a chair in a college not conducted for private profit, etc.82 A charitable trust differs from a private trust in perhaps three ways:
(1). The objects of the trust must be members of a class. The gift cannot be for the benefit of John, Henry or William (for then it would be a private trust), but for the benefit of a class in which John, Henry and William are to be found.
(2). The rule against perpetuities does not apply. A charitable trust may be in perpetuity.
(3). A doctrine called the cy pres doctrine applies. By this doctrine the court will not allow a charitable trust to fail because it is incapable of literal execution. If the particular object fails, the court looks to find the general intent of the donor and then applies the trust as nearly as may be to the object of the donor.
In other ways a court treats a charitable trust in a different fashion from a private one. Such trusts are encouraged and favored by the law. So, if a trustee has not been named in a charitable trust the court will appoint one.
It has been held that a gift to maintain a drinking fountain for horses is a charity. But trusts to maintain a private burial lot are not charitable, and therefore must not be made in perpetuity.
Whether a trust is private or charitable is important under inheritance tax laws, in respect to exemption from tax.
82. By statute 43 Eliz., C. 4 various purposes of charitable trusts were enumerated. This statute is usually regarded as illustrative and not exhaustive.
The trustee has the legal title, and must perform the trust, in its letter and spirit, and manage the estate in a prudent and profitable manner. He must look first to the safety of the investments made by him and secondly to the income.
A person named as trustee need not accept the trust. In case he does not desire to accept, he should for his own protection make an immediate and unequivocal rejection. But if he undertakes to act, he must act as a prudent man. He is not protected in merely acting in good faith. He must not undertake the trust if he is incapable of performing it with prudence. He must make repairs, keep up insurance, etc., and do all things that a prudent man would do in managing his own property. Where the trust consists in funds to be invested, the first requisite is safety of investment. To this end the courts have said that a trustee must invest in such securities as first mortgages on real estate, government bonds, etc. Some statutes make an extension of this and allow a trustee to invest in municipal bonds, corporation bonds, etc., where a reasonably prudent man would regard them as safe. Of course, if the trust directs the investment in a particular way the trustee must act in that way.
The profit from the trust fund is of second consideration. That must be made as large as possible compatible with safety of the investment.
A spendthrift trust is a trust which provides that the beneficiary cannot by assignment or otherwise impair the trust fund or income and that creditors shall have no recourse to the fund or income. If of public record it is in most jurisdictions upheld as valid.
A spendthrift trust, as above described, is for the purpose of preventing waste of the funds or income by an irresponsible beneficiary. In most jurisdictions it is regarded as valid,83 largely on the theory that creditors take a risk when dealing with a person in such a situation. After the beneficiary actually gets his income, then it loses its character as a trust fund and creditors may attack it or the beneficiary may spend it as he chooses.
One cannot convey his own property to a trustee upon a spendthrift trust in his own favor. He cannot thus place his own property beyond the reach of his creditors.
Implied trusts are trusts raised by the law on account of the equities of the circumstances. They are of two sorts; resulting and constructive.
Where one is in the ownership of property which from the circumstances evidently in equity belongs to another, the law raises a trust so that the legal title may be made to come to him who is the real owner. There are two sorts - resulting and constructive.
A resulting trust is one which arises under circumstances from which it appears that one who becomes clothed with the legal title was not meant by the parties to have the beneficial title thereto though no trust has been declared.
We will find that constructive trusts are trusts which arise largely out of circumstances which are fraudulent or in the law amount to fraud. A resulting trust is one in which the parties have entered into some transaction by which one becomes clothed with the legal title but it is evident from the circumstances that he is not to have the beneficial title. One class of cases is that in which purchase money is paid by one person and the title taken in the name of another. Here the law presumes a trust unless it affirmatively appears that a gift was intended. Another class of cases is that in which a trust is made upon purposes which thereafter fail or upon purposes which are to be announced later but are not announced.84 There are also some other classes of cases but these are the chief ones in which a trust results.
83. Wagner v. Wagner, 244 111. 101.
A constructive trust arises where there is fraud or inequitable conduct by which one comes into the legal ownership of property which he does not otherwise possess.
Where one acquires a title through fraudulent conduct or through inequitable conduct, the court may impress the title with a trust in favor of the real owner or person who ought to be the real owner. The circumstances are multitudinous. Thus, where property is about to be conveyed in trust and a third person induces the donor not to name the trust but convey to him and he will perform the trust, as where A being about to make a will in B's favor is induced by C to convey to him upon his representation that he will convey to B.
So where an agent takes title in his own name; so where trust funds are used by the trustee for investments of his own. In these and many other cases the court impresses the property with a trust.
84. Trapnall v. Brown, 19 Ark. 39.