Gift to a trust where the donor is one of several trustees (Choithram v Pagarani)
Helena Brandt executed a trust deed creating the Brandt Family Trust for her grandchildren, naming herself and her two adult sons, Lukas and Max, as the trustees. Immediately after signing, in front of all three, she said: 'I now give my investment portfolio to the Brandt Family Trust.' She intended this to take effect at once. The portfolio stayed registered in Helena's sole name, and she signed no transfer to the three trustees. She died a month later. Her next of kin, who take her estate on intestacy, argue that the gift is incomplete.
Which of the following best describes the status of the portfolio?
Choose one answer to see the reasoning.
Worked answer
Correct answer B: It is held on the Brandt Family Trust's trusts, because Helena was a trustee herself, so her conscience was bound and her estate must complete the transfer.
THE RULE TO REMEMBER
A donor who makes an immediate gift to a trust of which they are one of the trustees is bound by it and must vest the property in all the trustees (Choithram).
Gift to a trust where the donor is one of several trustees (Choithram v Pagarani)
Ordinarily a gift on trust is complete only when the property is vested in the trustees, and ineffective words of outright gift will not be read as a declaration of trust (Milroy v Lord). In Choithram v Pagarani the Privy Council held that this does not defeat a gift where the donor is herself one of the trustees. Words of gift 'to the trust' can only mean a gift to the trustees to hold on the trusts of the deed. The Board said there is no distinction in principle between a donor who declares herself sole trustee and one who declares herself one of several trustees: in both cases her conscience is affected and it would be unconscionable to let her resile. Where one of a body of trustees has the property vested in her, she is bound by the trust and must transfer it into the names of all the trustees. Helena made an immediate, unconditional gift to a trust of which she was a trustee, so her estate holds the portfolio on the trusts of the deed and must vest it in the trustees.
Why A is wrong: Choithram holds that vesting in one of the trustees, the donor, is enough; transfer to all trustees can be compelled afterwards.
Why C is wrong: In context 'I give to the trust' means a gift to the trustees on the trusts of the deed, so Milroy v Lord is not breached.
Why D is wrong: Beneficiaries of a constituted trust can enforce it even though they are volunteers; no value is needed.
Why E is wrong: Retaining the legal title as one of the trustees does not prevent constitution; no resulting trust arises.
A little more practice done.
Related questions
Imperfect gift of shares not saved as a declaration of trust (Milroy v Lord)
Which of the following best describes Felix's position?
The rule in Re Rose: donor has done everything in their power
Who is entitled in equity to the shares?
Imperfect gift perfected by appointment as executor (Strong v Bird)
Who is entitled to the piano?
A GOOD HABIT, DELIVERED
Tomorrow's question.
In your inbox.
One free question a day, with the answer and reasoning.
No course pitches. Just your daily practice.