Trust Assets Research Articles

Trustees’ Indemnities and Fiduciary Duties: The High Court Appeal in Naaman v Jaken Properties Australia Pty Ltd

The High Court of Australia appeal in Naaman v Jaken Properties raises the question whether a successor trustee owes a ‘fiduciary duty’ to the former trustee to not destroy, jeopardise or diminish the former trustee’s right of indemnity over trust assets. That question arises to determine whether third parties are liable to account in equity as knowing recipients of property dissipated to frustrate the former trustee’s indemnity. It is argued in the appeal that the successor trustee holds the trust assets on express trust for the former trustee to the extent of the former trustee’s indemnity. That conclusion does not account for the variety of equitable interests. Three main points emerge. First, a current trustee has a ‘beneficial interest’ in trust assets only in a superficial sense. Second, upon transfer, that ‘beneficial interest’ is not ‘retained’ by the former trustee; the entitlement of a former trustee over the trust fund changes, and becomes analogous to a charge over a fund. The language of ‘beneficial interest’ in each case is misleading and should be eschewed. Third, it is unnecessary to ask, for the purposes of Barnes v Addy liability, whether any ‘duty’ owed by a successor to a former trustee is a ‘fiduciary duty’.

Discussion on the Application of Trust Assets in Estate Tax Payment According to the Latest Interpretation from the Ministry of Finance-Starting from the Ministry of Finance's Directive No. 11300533430 dated June 14, 2024

Discussion on the Application of Trust Assets in Estate Tax Payment According to the Latest Interpretation from the Ministry of Finance-Starting from the Ministry of Finance's Directive No. 11300533430 dated June 14, 2024

Examining present beneficiaries’ requests for trust information and ascertaining what is “reasonable” through consideration of the common law and industry practice

Abstract It is often a challenge for trustees to determine to what information a requesting present beneficiary is entitled. While the weight of the sources indicates that the trust instrument and statements of trust assets should be provided, what those statements must include and what types of other information must be provided remains a grey area. Still, trustees can find some guidance in case law and commonsense practices.

Localizing the Public Trust

The public trust doctrine is the manifestation of a simple principle: certain natural resources are too important to entrust to private par-ties. Instead, those natural resources are held by the government in trust for the public. When we think of the contemporary public trust doctrine, we usually think of the doctrine as a state-level phenomenon. After all, the State is the sovereign entrusted with ownership of the public trust.
 But the doctrine also includes local governments, which play im-portant and substantive, if under-appreciated, roles. Missing from the conversation, however, is how local governments should be incorpo-rated into the doctrine. Should local governments be permitted auton-omy as co-trustees of the public trust? Do we trust local governments to safeguard public trust assets?
 This Article develops a framework for the normative relationship be-tween state and local governments in the public trust context. Doing so formally recognizes the role of local governments, thus localizing a doctrine that exists almost exclusively at the state level. This Article begins by reframing the doctrine as part of the lived experience of the public rather than merely a tool of the judiciary. Next, this Article cat-alogs the benefits of localizing the public trust doctrine, including the impacts local actors already have on the doctrine, localism’s tradition-al benefits, environmental justice, and environmental federalism.
 This Article then proposes localizing the public trust doctrine through three principles: (1) minimum state requirements; (2) increased local autonomy; and (3) shared responsibilities between local and state governments. This framework mirrors cooperative federal-ism and shares its advantages. Finally, the Article looks at local cli-mate adaptation as a case study of how states and local governments can begin localizing the public trust doctrine.

An analysis of the risks that arise for discretionary trust settlements in the event of a divorce: to what extent does the Family Court’s asset division approach undermine discretionary trusts?

Abstract Following the House of Lords’ decision in White v White, the concept of ‘equality’ has made asset computation and division following divorce, particularly in ‘big-money’ cases, more extensive. This article examines whether discretionary trusts are vulnerable to interference by the Family Court during ancillary relief proceedings through considering three approaches. First, by varying the trust settlement under section 24(1)(c) of the Matrimonial Causes Act 1973 (‘MCA’). Second, through the ‘resource’ approach under section 25(2)(a) MCA. Third, by relying on the sham doctrine. It accordingly identifies practical considerations for trustees and settlors to ensure that their trust assets remain intact following divorce proceedings.

Trustee powers—observations from Australia

Abstract Much of the current and future intergenerational wealth transfers in Australia is and will be through discretionary family trust structures and testamentary trusts. The number of disputes in relation to the administration of these trusts will very likely increase. This article provides a general overview of some specific aspects of trust administration and trustee powers and obligations in Australia, including adding and removing beneficiaries, decanting trust assets, provision of information to beneficiaries, fettering of discretions and avoiding or resolving disputes in relation to the exercise of those powers.

Cyprus international trusts as a legal arrangement that is immune to forced heirship claims

Abstract The portions of a deceased’s estate that can effectively be passed to surviving family members depend largely on the laws and regulations of each jurisdiction coupled with applicable EU Regulations and international conventions. Succession laws, wills and trusts, may face the challenges of forced heirship provisions that one may attempt to bypass by creating an inter vivos or testamentary trust, but which carry the risk of being disputed. Cyprus trust law does not recognise forced heirship claims against trust assets. The law relating to inheritance or succession in Cyprus or in any other country does not in any way affect any transfer or disposition of assets to a Cyprus International Trust or the validity of the trust.

Attacks on trusts in civil law jurisdictions

Abstract Modern trust litigation is distinctly international, but what happens when jurisdictions without an established law of trusts become embroiled in claims following the misapplication of trust assets? This article considers how the involvement of such non-trust jurisdictions affects claims to trace or follow equitable property rights, and in respect of dishonest assistance and knowing receipt. The latter is of particular significance in view of the 2022 decision of the Court of Appeal in Byers v Saudi National Bank—now headed for the Supreme Court—which held that actual, beneficial receipt is required to found a knowing receipt claim.

Paradox of state authority in supervision of child trust assets in Indonesia

One of the obligations of a sovereign state is to provide legal protection to every citizen, including every child who is not under the authority of his parents. The authority of the state in supervising the assets of children under guardianship through BHP based on Articles 366 and 369 of the Civil Code, in practice becomes paradoxical because in general the Court does not hand over copies of guardianship stipulations to BHP. The court considers that the two articles referred to are no longer valid, while on the other hand there is no regulation that specifically regulates this authority. The method used in this research is by taking respondents from the BHP and the Courts, so that an objective contribution is obtained. The results of the study show that the level of effectiveness in the implementation of guardianship oversight authority is relatively low, namely 68.18. Therefore, in the short term, it is necessary to accommodate the provisions of Articles 366 and 369 of the Civil Code into the Child Protection Law, while in the long term, Indonesia needs to initiate the concept of a legal system for child guardianship, as has been done in several countries.

The abuse of the beneficial ownership of trusts to conceal assets in insolvency and divorce proceedings: a South African study

PurposePrevious research has indicated that trusts are used to commit various economic crimes, but limited studies examine the exact method of how trusts are abused. This paper aims to determine how trusts are abused to conceal assets in insolvency and divorce proceedings. Apart from discussing how fraudulent trusts are evaluated by South African courts, two court cases will also be analysed to determine how trusts have been abused in the past to conceal assets in insolvency and divorce proceedings.Design/methodology/approachThe methodology used is a literature study, predominantly using court cases and relevant statutes as the primary sources of information. The difference between a sham and alter ego trust is discussed, whereafter two court cases are dissected to identify how trusts have been abused to conceal assets.FindingsThe study found that trusts can be abused in different ways to conceal assets in insolvency and divorce proceedings. This can vary from the way the trust is established to the way the trust is used. But trusts are particularly susceptible to abuse when there is no separation between the ownership and enjoyment of trust assets, and the trust lacks independent trustees.Originality/valueThe research finding can be used to better understand how trusts are abused in divorce and insolvency proceedings.

Priority of trustees’ indemnity inter se: pari passu or first in time priority?

Given that a trust is not a legal person, it cannot incur liabilities in its own name. Trustees incur liabilities on behalf of the trust. They are not agents but are personally liable without limit. In return the trustee enjoys an indemnity from trust assets. A trustee is entitled to pay expenses properly incurred out of the trust estate (a right of exoneration) or, if the trustee pays it in the first instance from the trustee’s own pocket, to be reimbursed out of the trust estate. To secure its right of indemnity, the trustee has an equitable lien on the trust assets which takes priority over the rights of the beneficiaries. Its creditors are subrogated to the trustee’s right of indemnity. The creditor will therefore be able to enforce against the trust assets to the extent that the trustee would have been able to do so. Thus, if the trustee has lost its right of indemnity because of a breach of trust, the creditor would have no right to satisfy the creditor’s claim out of the trust assets.

Re-exploring the nature of dual ownership in English trusts: a Scottish law perspective

Abstract Owing to the unique social and historical background, the ownership of trust assets of English trusts is divided into two parts, namely the ownership in common law, which is held by the trustee, and the ownership in equity which is held by the beneficiary. In consideration of the unified ownership principle in civil law jurisdiction, most scholars argued that there is no theoretical compatibility between the common law trust and civil law tradition. This article aims to re-explain the legal nature and economic functions of the dual ownership structure of English trusts by re-considering the origins of the trust in medieval England and comparing the practices of quasi-trust regimes in continental and mixed jurisdictions, and finally this article argues that the success of the Scottish trust in functioning as an equivalent asset management mechanism to the English trust may have provided an answer to the above paradox.

Pugachev five years on: were the trusts really bare trusts?

Abstract In JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017] EWHC 2426 (Ch), Birss J, as he then was, held that certain trusts which conferred wide powers on the settlor were in substance nothing more than bare trusts. This meant that judgment creditors of the settlor could enforce against the trust assets. Despite initial excitement among trusts and civil fraud practitioners, Birss J’s “bare trust” analysis has not been widely adopted in subsequent cases. Five years on, the policy considerations underpinning the decision in Pugachev are as easy to understand as ever, but what of the legal reasoning? Was Birss J right to say that the trusts were bare trusts? Could a better way of making the trust assets available to the settlor’s creditors have been found?

Guidelines For Investing PRG, PRG-HIPC, and CCR Trust Assets

Guidelines For Investing PRG, PRG-HIPC, and CCR Trust Assets

Exemption clauses in the modern age: do they result in an “institution in crisis”?

Exemption clauses are a common feature of modern trusts. These seek to exempt trustees from liability for breach of trust, or to indemnify them from the trust assets for personal liability for breach. Contract law has long featured a rule that exemption clauses cannot protect a person from liability arising from the person’s own fraud.2 It cannot safely be assumed that rules of contract will be applied to trusts and, if they are, how they might be adapted to the different trust context. The rule in contract is that a person’s own fraud cannot be excluded. Fraud is capable of different meanings in different contexts. Equity has long treated conduct falling short of actual fraud to be constructive fraud.3 There was uncertainty as to whether this special meaning would apply to trust exemption clauses. If fraud has the same meaning as in a contractual setting, then exemption...

Knowing receipt: a question of priorities

Abstract The recent judgment of Fancourt J in Byers v Samba Financial Group considers whether a transferee of trust assets who has taken free of the beneficiary’s proprietary interest under the applicable foreign law of property can nevertheless be exposed to personal liability under the English law of knowing receipt. The issue, as the Judge observed, may be of considerable importance to equity lawyers.

THE DIVISIBILITY OF TRUST ASSETS IN DIVISION OF MATRIMONIAL PROPERTY: A CASE STUDY OF DIVISION OF MATRIMONIAL PROPERTY IN KENYA

The problem that arises is whether the literal meaning of the law that provides that trust assets and interests are to be held as property separate from matrimonial property should be upheld or should the court, as the custodian of the law, in a bid to meet the ends of justice, interpret the law in a manner that defines what a legal and true trust is, so as to limit the existence of sham trusts that are created for the sole purpose of avoiding property from being classified as matrimonial property for the purposes of settling divorce litigations.

The Current Status and Tasks of the Living Trust ―Focusing on the Relationship with the Forced Share―

Compared to the will, the trust system as the means of inheritance in Korea has not been used much due to the lack of history or publicity. However, the real reason for preventing the use of the living trust is that it cannot solve the problem regarding forced share system, nor does it have any tax benefits. Eventually, the biggest obstacles revitalizing the trust system as a new method of the property succession is the legal issues surrounding forced share and tax. However, Korean District Court decision was recently issued to the living trust that the entrusted property may not be subject to a claim of return for forced share. The court decision shocked not only the legal profession but also the socio-economic cummunity. In advance, this study explains the current status of the living trust, and look into the relationship between the living trust and the issues of the forced share. With regard to the current status of the living trust, this study introduces the first litigation case and the advisory case related. In addition, this study examines the theories and the recent court decision of whether trust assets can be included in the basic property for the calculation of forced share of heirs. In order for the trust to function properly as a new means of inheritance, it must address limitations and opacity inherent in forced share system and tax. It is hoped that the government will establish socio-economic foundation for carrying out the natural function of the trust which is a method of property succession.

In Joint Matrimony We Share: Controlling the Powers to Use the Trust to Limit Matrimonial Property Rights in South African Law

The deceitful use of trusts has created a fair amount of controversy, specifically where it has appeared that a trust has been employed to limit the rights of third parties. This article argues that it is in the interests of the law to ensure that rights are vindicated when unlawfully limited. Similarly, it is in the interest of the common good that legitimately acquired rights are protected. Trust laws state that there must be a separation between control and enjoyment and, in cases where there is no separation, the courts may scrutinise the affairs of a trust. Recent developments have illustrated that measures that provide relief to spouses upon the dissolution of the marriage may not be readily invoked, especially for marriages in community of property. Family trusts have provided spouses with avenues for hiding assets that would otherwise fall into the joint estate. Courts need to adopt a robust approach when dealing with trust assets upon the dissolution of a marriage, particularly to protect the rights of competing spouses.

Israel: trusts and succession

Abstract The Israeli Foundation refers to the legal structure of an Israeli private trust, created in combination with an underlying company to hold the trust assets. This article will focus on this structure, as well as on the creation of the Israeli private trust by way of a deed (hekdesh) or by way of a contract. The article will continue by looking into the Israeli real estate trust, which is commonly created by a contract, and finally the article will explore the inheritance procedure in Israel and the issues arising from the conflict between the Trust Law, the Contracts Law, the Succession Law and the Gift Law.