The Proper Constitution of a Trust: Sham Trusts and Other Problems

AuthorDavid Brownbill
Pages142-147
LEGAL ISSUES IN OFFSHORE FINANCIAL SERVICES
142
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The Proper Constitution of a Trust:
Sham Trusts and Other Problems
David Brownbill
THIS PAPER OUTLINES some of the key requirements for establishing valid
trusts in an offshore legal regime.
A. The Essentials for a Valid and Effective Trust
The following questions must be answered appropriately before a valid and
effective trust is established:
(1) What are specific assets to be held in trust?
(2) Are the assets beneficially owned by a person?
(3) Who has the capacity to transfer the assets into trust?
(4) Who makes a valid disposition of those assets to a trustee?
(5) Is the intent to create a trust on the terms set out in the trust deed
expressed?
(6) Which terms set out in the trust are sufficiently certain?
(7) Are any terms of the trust unlawful (in the sense that they breach
e.g. perpetuities laws)?
(8) Which terms are effective to take the trust assets out of the settlor’s
estate.
B. Completely Constituted and Incompletely Constituted Trusts
Role of the trust deed:
Three general comments are applicable in the offshore context:
(1) a trust deed is not needed for the creation of a trust;
(2) if there is a trust deed, its function is, usually, evidential or referential;

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