Selected Equity & Trusts Terms

will n. A document by which a person (called the testator) appoints executors to administer his estate after his death, and directs the manner in which it is to be distributed to the beneficiaries he specifies. To be valid, the will must comply with the formal requirements of the Wills Act 1837 (see execution of will) and the testator must have testamentary capacity when the will is made. A will can be amended by the execution of a codicil or a duly executed alteration. It can be revoked by the testator destroying it with that intention, or making another will. It may be revoked in part through partial destruction (with the necessary intent), obliteration of words (rendering them indecipherable) or through signed and attested alterations (such as scoring out words). It is automatically revoked if the testator marries except where at the time it was made the testator was expecting to marry a particular person and he intended his will to survive the act of marriage. See also interpretation of wills; joint will; mutual wills; nuncupative will; privileged will; revocation of will.

public trust A trust for the benefit of the public , which may or may not be a charitable trust

charitable trust A trust for purposes that the law regards as charitable. There is no statutory definition of ‘charitable’. In a legal sense, a purpose is charitable only if it is for the furtherance of religion, for the advancement of education, for the relief of poverty, or for other purposes beneficial to the community. In every case the purpose must be for the benefit of the public or a section of it (though in cases of relief of poverty this is very easily satisfied); the precise meaning depends on the class of charity in question. The last class is taken to include every object of general utility to the public; it includes, for example, trusts for the protection of animals generally and for the provision of fire brigades. A trust cannot be charitable unless it is solely and exclusively for charitable purposes: benevolent and philanthropic purposes are not necessarily charitable. Trusts for purposes that are predominantly political are not charitable. A charitable trust has many advantages over a private noncharitable trust: its objects do not have to be certain; charitable trusts are not subject to the rules against perpetuities or against perpetual trusts; if the objects are or have become impossible or impracticable, the trust may be saved by the cy-près doctrine; and the trustees may act by a majority. The greatest benefit to a charitable trust is that it has fiscal advantages: a charity is either wholly or partially exempt from income tax, corporation tax, capital gains tax, inheritance tax, stamp duty, and council tax.

indemnity n. An agreement by one person (X) to pay to another (Y) sums that are owed, or may become owed, to him by a third person (Z). It is not conditional on the third person defaulting on the payment, i.e. Y can sue X without first demanding payment from Z. If it is conditional on the third person's default (i.e. if Z remains the principal debtor and must be sued for the money first) it is not an indemnity but a guarantee. Unlike a guarantee, an indemnity need not be evidenced in writing.

An indemnity insurance policy is taken out for the benefit of a mortgagee (lender) when a high proportion (often 80%) of the purchase price for a domestic property is borrowed. Such indemnity policies have been held by the courts not normally to be for the benefit of the mortgagor (borrower), although the mortgagor pays the premiums on the policy; only the mortgagee can make a claim. See also insurance.

trustee n. A person having a nominal title to property that he holds for the benefit of one or more others, the beneficiaries (see trust ). Trustees may be individuals or corporate bodies (see trust corporation ) and can include such specialists as judicial trustees , custodian trustees , and the Public Trustee . A trustee must show a high standard of care towards his beneficiaries, must not allow his interests to conflict with those of his beneficiaries, and must not profit from his trust. He is not usually entitled to remuneration although he may recover expenses necessarily incurred (see charging clause ). Trustees may refuse their office, retire, or resign, but they remain liable for acts carried out during their trusteeship. The power to appoint replacement trustees is usually given either to the beneficiaries or to the remaining trustees; in default the court will appoint replacement trustees. Trustees have a wide range of powers and duties, including a duty to act equally between the beneficiaries and a power to advance money to them (see advancement ). In the exercise of their duties they are answerable to the court.

trust n.1. An arrangement in which a settlor transfers property to one or more trustees, who will hold it for the benefit of one or more persons (the beneficiaries or cestuis que trust, who may include the trustee(s) or the settlor) who are entitled to enforce the trust, if necessary by action in court. The trust, recognized originally in Chancery, is based on confidence and developed from the use; it has been described as the most important contribution of English equity to jurisprudence. The beneficiary has rights against the trustee and may also have rights over the property in the hands of others (see tracing trust property). When a sole beneficiary is 18 or over, sane, and entitled to all the trust property, he may require the trustees to transfer that property to him; this applies equally when all the beneficiaries are 18 or over, sane, and likewise entitled. For a trust to exist, the three certainties must be present: certainty of intention (i.e. to create a trust), certainty of subject matter (the property in the trust), and certainty of objects (those who will or may benefit under the trust).

There are few formal technical requirements necessary for the creation of a trust, except where land is concerned, though express trusts are usually found in professionally drafted documents. Trusts are also commonly used to protect an individual's (or company's) ownership of property, when it is feared that the possessor of the property may become insolvent. See active trust; charitable trust; discretionary trust; executed trust; express trust; implied trust; protective trust; secret trust; statutory trust.

2. (in the National Health Service) See NHS Trust; Primary Care Trust.

settlor n. A person who creates a settlement. In a broad sense the term includes testators; in a more restricted sense it signifies one who settles property during his life.

settlement n. A disposition of land or other property, made by deed, will, or very rarely by statute (as in the Duke of Marlborough Annuity Act 1706), under which trusts are created by the settlor designating the beneficiaries and the terms on which they are to take the property. Settlements are of many different kinds; for example, marriage settlements, strict settlements, voluntary settlements, and, particularly, settlements under the Settled Land Act 1925 (see settled land). All settlements of land now take effect (since 1997) as trusts of land.

deed n. A written document that must make it clear on its face that it is intended to be a deed and validly executed as a deed. Before 31 July 1990, all deeds required a seal in order to be validly executed, but this requirement was abolished by the Law of Property (Miscellaneous Provisions) Act 1989. A deed executed since that date by an individual requires only that it must be signed by its maker in the presence of a witness, or at the maker's direction and in the presence of two witnesses, and delivered. Deeds executed by companies require before delivery the signature of a director and secretary, or two directors, of the company; alternatively, if the company has a seal, the deed may be executed by affixing the company seal. If the deed is a contractual document, it is referred to as a specialty. A promise contained in a deed is called a covenant and is binding even if not supported by consideration. Covenants may be either express or implied. A deed normally takes effect on delivery; actual delivery constitutes handing it to the other party; constructive delivery involved (in strict theory) touching the seal with the finger, and saying words such as “I deliver this as my act and deed”. If a deed is delivered but is not to become operative until a future date or until some condition has been fulfilled, it is called an escrow. The recitals of a deed are those parts that merely declare facts and do not effect any of the substance of the transaction. They are usually inserted to explain the reason for the transaction. The operative part of a deed is the part that actually effects the objects of the deed, as by transferring land. The testatum (or witnessing part) constitutes the opening words of the operative part, i.e. “Now this deed witnesseth as follows”. The premises are the words in the operative part that describe the parties and the transaction involved. The parcels are the words in the premises that describe the property involved. The testimonium is the concluding part, beginning “In witness whereof”, and containing the signatures of the parties and witnesses. The locus sigilli is the position indicated for placing the seal. When a deed refers to itself as “these presents”, “presents” means present statements. The advantage of a deed over an ordinary contract is that the limitation period is 12 rather than 6 years (see limitation of actions) and no consideration is required for the deed to be enforceable. See also deed poll.

equitable interests Interests in property originally recognized by the Court of Chancery, as distinct from legal interests recognized in the common-law courts. They arose in cases when it was against the principles of equity for a person to enforce a legal right. Originally equitable rights (e.g. a trust, or the equity of redemption under a mortgage) were enforceable against the person with a legal right over property in question. Later, however, those who were given the property by the holder of the legal interests took it subject to equitable interests; later still, anyone who bought property knowing of the equitable interests was bound by them. In the developed law, everyone took property subject to equitable interests except those who bought it and neither knew nor ought to have known of the equitable interests (the doctrine of notice). Since 1925, equitable interests may be protected by the doctrine of overreaching, under the system of land charges, or by notice.

equitable mortgage (equitable charge) A mortgage under which the mortgagee does not obtain a legal estate in the land. An equitable mortgage may arise as follows:
(1) If the mortgagor has only an equitable interest in the land, he can only grant an equitable mortgage. For example, a mortgage granted by a beneficiary under a trust of land could only be equitable.
(2) An equitable mortgage will arise if the mortgage is made by deed (a requirement for legal mortgages). The contract for the mortgage must nevertheless be made in writing.

bequest n. A gift by will of property other than land. Compare devise. See legacy.

legacy n. A gift of personal property effected by will (compare devise). A general legacy is a gift of property not identifiable with a specific asset or fund; for example, a simple legacy of “£1000 to A” or “my shares to B”. A specific legacy is a particular identifiable object, for example a named painting. It is liable to ademption but is otherwise payable by the deceased's personal representatives in priority to general legacies. A demonstrative legacy is payable from a specified fund; for example, “£500 from the £1000 kept under my bed”. Such a legacy is not adeemed if the testator disposes of the fund during his lifetime and is payable in priority to general legacies. Pecuniary legacies (i.e. gifts of cash) carry interest from one year after the testator's death. A residuary legacy is one that disposes of the whole of the testator's personal property after payment of debts and specific, demonstrative, and general legacies.

beneficiary n.1. A person entitled to benefit from a trust. The beneficiary holds a beneficial interest in the property of which a trustee holds the legal interest. A beneficiary was formerly known as the cestui que trust.

2. One who benefits from a will.

trust instrument A deed under which property is vested in trustees upon trust to apply it for the benefit of the beneficiaries specified in the deed. In the case of settled land, the trust instrument appoints the trustees of the settlement, sets out the interests to which the beneficiaries are entitled and any powers conferred in extension of those contained in the Settled Land Act 1925, and bears any ad valorem stamp duty payable in respect of the settlement. A will admitted to probate may also act as a trust instrument.

title n.1. A person's right of ownership of property. Someone with a good title has adequate evidence to establish his right. See absolute title; qualified title; title deeds.

2. The heading of an Act of Parliament, which may be a long title or a short title.

3. The name of a particular court action, which is derived from the heading of the originating process that initiated it.

testate adj. Having left, at one's death, a legally valid will.

next of kin A person's closest blood relations. Parents and children (including those of unmarried parents) are treated as being closer than grandparents, grandchildren, or siblings.

codicil n. A document supplementary to a will, which is executed with the same formalities under the Wills Act 1837 (see execution of will) and adds to, varies, or revokes provisions in the will. It must be proved with the will. A codicil confirming a will normally republishes the will (see republication of will) and may revive a will that has been revoked if that is the testator's clear intention. If many changes are made to the will it is better to execute a new will.

equity n.1. That part of English law originally administered by the Lord Chancellor and later by the Court of Chancery, as distinct from that administered by the courts of common law. The common law did not recognize certain concepts (e.g. uses and trusts) and its remedies were limited in scope and flexibility, since it relied primarily on the remedy of damages. In the Middle Ages litigants were entitled to petition the king, who relied on the advice of his Chancellor, commonly an ecclesiastic (“the keeper of the king's conscience”), to do justice in each case. By the 15th century, petitions were referred directly to the Chancellor, who dealt with cases on a flexible basis: he was more concerned with the fair result than with rigid principles of law (hence the jurist John Selden's jibe that “ equity varied with the length of the Chancellor's foot”). Moreover, if a defendant refused to comply with the Chancellor's order, he would be imprisoned for contempt of the order until he chose to comply (see in personam). In the 17th century conflict arose between the common-law judges and the Chancellor as to who should prevail; James I resolved the dispute in favour of the Chancellor. General principles began to emerge, and by the early 19th century the Court of Chancery was more organized and its jurisdiction, once flexible, had ossified into a body of precedent with fixed principles. The Court of Chancery had varying types of jurisdiction (see auxiliary jurisdiction; concurrent jurisdiction; exclusive jurisdiction) and many of its general principles were stated in the form of maxims of equity; equity had (and still has) certain doctrines (see election; conversion; reconversion; performance of contract; satisfaction). Under the Judicature Acts 1873–75, with the establishment of the High Court of Justice to administer both common law and equity, the Court of Chancery was abolished (though much of its work is still carried out by the Chancery Division). The Judicature Acts also provided that in cases in which there was a conflict between the rules of law and equity, the rules of equity should prevail. The main areas of equitable jurisdiction now include trusts, equitable interests over property, relief against forfeiture and penalties, and equitable remedies. Equity is thus a regulated scheme of legal principles, but new developments are still possible (“ equity is not past the age of child-bearing”): recent examples of its creativity include the freezing injunction and the search order.

2. An equitable right or claim, especially an equitable interest, or equity of redemption, or mere equity.

3. A share in a limited company.

Source: A Dictionary of Law. Ed. Elizabeth A. Martin. Oxford University Press, 2002. Oxford Reference Online. Oxford University Press. 26 January 2005 www.oxfordreference.com

View print version

Oxford University Press, Online Resource Centre, Selected Equity & Trusts Terms.

Selected Equity & Trusts Terms