Settlor
Encyclopedia
In law a settlor is a person who settles property on trust law
for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the settlor is usually referred to as the testator
. The settlor may also be the trustee
of the trust (where he declares that he holds his own property on trusts) or a third party may be the trustee (where he transfers the property to the trustee on trusts). In the common law
it has been held, controversially, that where a trustee declares an intention to transfer trust property to a trust of which he is one of several trustees, that is a valid settlement notwithstanding the property is not vested in the other trustees.
Capacity to be a trustee is generally co-extensive with the ability to hold and dispose of a legal or beneficial interest in property. In practice, special considerations arise only with respect to minors and mentally incapacitated persons.
A settlor may create a trust by manifesting an intention to create it. In most countries no formalities are required to create an inter vivos trust over personal property, but there are often formalities associated with trusts over real property
, or testamentary trusts
. The words or acts of the settlor must be sufficient to establish an intention that either another person or the settlor himself shall be trustee of the property the beneficiary; a general intention to benefit another person on its own is sufficient. These formalities apply to express trusts only, and not to resulting, implied or constructive trust
s.
For a settlor to validly create a trust, in most common law legal systems they must satisfy the three certainties, established in Knight v Knight
:
Where a settlement of property on a third party trustee by a settlor fails, the property is usually said to be held on resulting trust
s for the settlor. However, if a settlor validly transfers property to a third party, and the words used are held not to create a trust, the usual rule is that the donee take the property absolutely.
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
for the benefit of beneficiaries. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is a testamentary trust, the settlor is usually referred to as the testator
Testator
A testator is a person who has written and executed a last will and testament that is in effect at the time of his/her death. It is any "person who makes a will."-Related terms:...
. The settlor may also be the trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
of the trust (where he declares that he holds his own property on trusts) or a third party may be the trustee (where he transfers the property to the trustee on trusts). In the common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
it has been held, controversially, that where a trustee declares an intention to transfer trust property to a trust of which he is one of several trustees, that is a valid settlement notwithstanding the property is not vested in the other trustees.
Capacity to be a trustee is generally co-extensive with the ability to hold and dispose of a legal or beneficial interest in property. In practice, special considerations arise only with respect to minors and mentally incapacitated persons.
A settlor may create a trust by manifesting an intention to create it. In most countries no formalities are required to create an inter vivos trust over personal property, but there are often formalities associated with trusts over real property
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
, or testamentary trusts
Will (law)
A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death...
. The words or acts of the settlor must be sufficient to establish an intention that either another person or the settlor himself shall be trustee of the property the beneficiary; a general intention to benefit another person on its own is sufficient. These formalities apply to express trusts only, and not to resulting, implied or constructive trust
Constructive trust
A constructive trust is an equitable remedy resembling a trust imposed by a court to benefit a party that has been wrongfully deprived of its rights due to either a person obtaining or holding legal right to property which they should not possess due to unjust enrichment or interference...
s.
For a settlor to validly create a trust, in most common law legal systems they must satisfy the three certainties, established in Knight v Knight
Knight v Knight
Knight v Knight 3 Beav 148 is a landmark case in English equity law. It espouses the test that determines whether a trust has been validly constituted. This has the effect of determining whether assets can be disposed of in wills, or whether the wording of the will is too vague to allow...
:
- certainty of intention - whether the settlor (or testator) has manifested an intention to create a trust.
- certainty of subject matter - whether the property identified as being settled is sufficiently accurately identified.
- certainty of objects - the beneficiariesBeneficiary (trust)In trust law, a beneficiary or cestui que use, a.k.a. cestui que trust, is the person or persons who are entitled to the benefit of any trust arrangement. A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often...
must be clearly ascertainable within the perpetuity period.
Where a settlement of property on a third party trustee by a settlor fails, the property is usually said to be held on resulting trust
Resulting trust
A resulting trust is the creation of an implied trust by operation of law, as where property gets transferred to one who pays nothing for it; and then is implied to have held the property for benefit of another person. The trust property is said to "result" back to the transferor...
s for the settlor. However, if a settlor validly transfers property to a third party, and the words used are held not to create a trust, the usual rule is that the donee take the property absolutely.
See also
- Knight v KnightKnight v KnightKnight v Knight 3 Beav 148 is a landmark case in English equity law. It espouses the test that determines whether a trust has been validly constituted. This has the effect of determining whether assets can be disposed of in wills, or whether the wording of the will is too vague to allow...
- Express trustExpress trustWhere property is passed from an owner to a person an implied express trust, but no gift is made by the owner to that person, it is therefore held for the owner by the person, and this is the Resulting trust; where property should for some reason of public policy or rule of Equity be held by a...
- Offshore trustOffshore trustAn offshore trust is simply a conventional trust that is formed under the laws of an offshore jurisdiction.Generally offshore trusts are similar in nature and effect to their onshore counterparts; they involve a settlor transferring assets on the trustees to manage for the benefit of a person or...
- Taxation of trusts (United Kingdom)Taxation of trusts (United Kingdom)The taxation of trusts in the United Kingdom is governed by a different set of principles to those tax laws which apply to individuals or companies.-Inheritance tax:...
- Trust lawTrust lawIn common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...