Article by Jane B. Baron
It is commonly thought that fewer formalities are necessary to create a private express trust than are necessary to create wills or contracts, or to make inter vivos gifts. Indeed, in many cases, ‘nothing more than the manifestation of intention to create such a trust is necessary.’ Most frequently, the donor manifests his intent to create a trust by actually transferring trust property to the trustee. Yet an actual transfer is unnecessary, as an ‘owner of property can, by a declaration of trust, make himself trustee of the property for others.’
The sophisticated donor understands that ‘[t]he creation of a trust is a method of disposing of property.’ The clear specification of the property which is to be transferred or which is to be subject to the trust declaration reflects this understanding. However:
In many cases the owner of property in disposing of it has no very clear idea of the precise nature of the disposition which he intends to make. The distinction between a trust and other juridical relationships is not always an easy one to draw, even for the trained lawyer.
Since the factors that distinguish trusts from other donative devices are not intuitively obvious, it is not surprising that in numerous instances donors attempt to create relationships that resemble private express trusts, but fail to specify precisely what property is to be held by the trustee. For example, the donor may fail to identify which of several similar items such as bonds or bank accounts is to constitute the subject matter of the trust. Or the donor may make an apparently absolute gift to one individual, but also state that any property remaining at the individual's death (or not needed by that individual) is to be given to another. Or the donor, owning a substantial amount of property, may make a gift of a small, short-term income interest, without delineating any subset of assets from which the income is to be paid.
In all of these instances, the donor's failure to delineate precisely the property which is to be held in trust makes it difficult to define either the beneficiary's rights or the trustee's duties, yet the settlor's donative intent, and the objects of that intent, may be quite clear. Even when intent is clear, courts often hold that the alleged trusts fail because they do not meet the requirement that every trust have as its subject a definite or ascertainable interest in property, that is, a res. Under these holdings, the requirement that a trust have a res operates as a covert formality analogous to the execution formalities required for wills and the delivery formality required for inter vivos gifts.
This Article argues that the res requirement ought not to be treated as a formality because such treatment may defeat donative intent without addressing or furthering any of the legitimate concerns that arise in determining whether or not a trust has been created. Part I describes the res requirement and its potential for defeating clear donative intent. Part II sets forth the rationales which have been offered to explain the res requirement and argues that none of them convincingly justifies the requirement. Part III identifies a set of ‘core’ concerns that arise in disputes over whether a trust has been created, and outlines a new approach to applying the res requirement—an approach that truly takes those concerns into account.
About the Author
Jane B. Baron. Professor of Law, Temple University School of Law. A.B. 1975, Radcliffe College; J.D. 1978, Harvard Law School.
Citation
61 Tul. L. Rev. 45 (1986)