Trusts Law (TRs): essential SQE1 knowledgeTrusts Law is examined in FLK2 and represents 14–20% of the 180-question paper, approximately 25–36 questions. Ethics and professional conduct are assessed th…
Trusts Law is examined in FLK2 and represents 14–20% of the 180-question paper, approximately 25–36 questions. Ethics and professional conduct are assessed throughout. Official SRA SQE1 blueprint
The official syllabus covers:
A trust separates:
Trustees must:
A trust is not a separate legal person in the same way as a company.
Candidates should distinguish:
The classification affects:
An express private trust requires certainty of:
Failure of any certainty ordinarily causes the trust to fail.
The court examines the settlor’s words and conduct objectively rather than relying merely on labels.
The settlor must demonstrate an immediate intention to impose a binding trust obligation.
Words such as:
strongly indicate a trust, but no technical wording is essential.
Precatory words such as:
may be insufficient if they merely express a moral wish.
Key authorities include:
Candidates should distinguish:
A trust requires identifiable property held for beneficiaries or a recognised purpose.
A person who merely promises to pay money later may be a debtor rather than a trustee.
There must be certainty about:
A trust may fail where:
Examples of uncertainty include “the bulk of my estate” without an objective means of determining the amount.
Where assets are tangible and physically distinct, segregation may be necessary.
For example, a trust of:
may fail unless the relevant items are identified.
For identical intangible assets, such as shares of the same class, the courts may be more willing to find sufficient certainty without segregation.
Key cases include:
A fixed trust must make each beneficiary’s entitlement ascertainable.
A gift “in reasonable proportions” may be uncertain unless:
If the beneficial shares cannot be established, the trust may fail and the property may return to the settlor or estate under a resulting trust.
For a fixed trust, it must be possible to draw up a complete list of every beneficiary.
This is the complete-list test.
If even one potential beneficiary cannot be identified, the fixed trust may fail for uncertainty.
Key authority:
For a discretionary trust, the test is whether it can be said of any given person that they:
This is the “is or is not” test.
Key authorities:
A discretionary trust need not produce a complete list of beneficiaries.
The wording defining the class is unclear.
Example: “my best friends” may lack an objective definition.
Conceptual uncertainty can invalidate the trust.
The class is conceptually clear, but evidence is lacking to prove whether a particular person belongs to it.
Evidential difficulty does not necessarily invalidate a discretionary trust. The claimant may simply fail to establish membership.
Even where the objects are conceptually certain, a discretionary trust may fail if:
A trust for “all the residents of Greater London” is the traditional type of administratively unworkable class.
A power gives a person authority to distribute property but does not necessarily impose a duty to distribute it.
Candidates should distinguish:
For a power, the holder must consider periodically whether and how to exercise it, but need not necessarily make an appointment.
Under section 53(1)(b) LPA 1925, a declaration of trust concerning land must generally be:
The trust may sometimes be declared orally but will not ordinarily be enforceable until evidenced in signed writing.
Resulting, implied and constructive trusts are excluded by section 53(2).
Under section 53(1)(c) LPA 1925, a disposition of an existing equitable interest must generally be:
This applies where a beneficiary transfers or directs the transfer of an existing beneficial interest.
Key cases include:
A trust created by will must comply with section 9 of the Wills Act 1837.
The will must generally be:
A secret trust may operate outside the ordinary testamentary formalities where its specific equitable requirements are established, although specialist detail should not displace the core FLK priorities.
A trust is constituted when the trust property has been effectively vested in the trustees or the settlor has validly declared themselves trustee.
The settlor may create a trust by:
The intended method must generally be completed correctly.
Equity will not ordinarily:
Key authority:
The correct transfer method depends on the asset:
| Asset | Usual transfer requirement |
|---|---|
| Registered land | Deed and registration |
| Unregistered land | Deed and, where triggered, first registration |
| Shares | Stock-transfer form and registration by company |
| Chattels | Deed of gift or delivery with intention |
| Debt or legal chose in action | Written assignment and notice under section 136 LPA 1925 |
| Cheque | Proper endorsement and delivery |
| Bank account | Appropriate banking transfer or declaration |
If legal transfer is incomplete, the trust may still be enforceable only if an equitable exception applies.
Under the rule in Re Rose, an imperfect transfer may be treated as effective in equity where the transferor has:
The fact that registration by a third party remains outstanding does not necessarily prevent equitable transfer.
This exception is expressly identified in the post-September 2026 SQE specification.
An intended gift may be perfected where:
The doctrine may also apply to release of a debt in suitable circumstances.
It does not apply where the donor intended only a future gift.
Where a donor intended to transfer property to trustees and was themselves one of those trustees, the court may treat the donor as having declared themselves trustee with the others.
The principle does not mean that every failed gift becomes a trust. It depends on:
This exception is expressly included in the September 2026 specification.
A deathbed gift may be valid where:
It is revoked if the donor survives the contemplated peril.
This is an exceptional doctrine and is applied restrictively.
Beneficiary and share are predetermined.
Trustees decide which members of a class receive benefits and, commonly, how much.
The beneficiary is presently entitled, although enjoyment may be postponed.
Entitlement depends on satisfaction of a condition.
Candidates should distinguish:
Beneficiaries may terminate the trust and require transfer of the trust property where:
The rule may allow beneficiaries to:
It cannot normally be used where:
A valid charitable trust must:
Recognised purposes include:
Charitable trusts may receive important advantages, including:
Public benefit generally requires:
A class defined by a personal relationship with a particular individual may fail the public-element requirement, although poverty trusts receive more flexible treatment.
A private trust generally requires identifiable beneficiaries capable of enforcing it.
Non-charitable purpose trusts are normally void under the beneficiary principle.
Limited traditional exceptions include trusts for:
These exceptions are construed narrowly and remain subject to perpetuity limits.
A gift to an unincorporated association may be construed as:
The construction determines whether the gift survives dissolution and whether the beneficiary principle is satisfied.
A resulting trust returns beneficial ownership to the settlor or contributor.
Two principal categories are:
The September 2026 specification expressly distinguishes these categories.
An automatic resulting trust may arise where:
The trust arises because equity needs to locate the undisposed beneficial interest, not because it necessarily infers subjective intention.
A presumed resulting trust may arise where:
The presumption may be rebutted by evidence showing:
In certain relationships, a transfer may historically be presumed to be a gift rather than held on resulting trust.
Traditionally relevant relationships include certain transfers:
The presumption is weak, fact-sensitive and readily rebutted by evidence.
Candidates should apply the law in force at the examination cut-off rather than assuming that every family transfer is a gift.
Evidence of an unlawful purpose may affect whether a claimant can establish a beneficial interest.
Modern analysis considers whether denying the claim is a proportionate response to the illegality, including:
Key authority:
Where ownership of a family home is disputed, distinguish:
An express declaration of beneficial ownership is generally conclusive unless successfully challenged through doctrines such as:
Where a domestic property is purchased in joint names, the starting presumption is usually:
The presumption may be rebutted by evidence that the parties intended different beneficial shares.
The court may examine the parties’ whole course of conduct.
Key authority:
Where the home is in one party’s sole name, the non-owner must ordinarily establish:
Common intention may be:
Direct contribution to purchase price or mortgage is strong evidence. Other conduct may be relevant depending on the circumstances.
Key authority:
After establishing a common-intention constructive trust, the court determines the parties’ shares.
It may consider:
Where actual intention cannot be inferred, the court may sometimes impute a fair share reflecting the parties’ dealings.
Key authority:
The claimant must show conduct undertaken in reliance on the common intention.
Potential detriment includes:
Ordinary domestic contributions alone may be insufficient unless connected to the understanding about ownership.
A claimant must establish:
The elements are considered together rather than as isolated boxes.
The assurance must be sufficiently clear in context but need not always state a mathematically precise interest.
The remedy is flexible and seeks to satisfy the equity proportionately.
Possible remedies include:
The court considers:
Key authorities include:
Trustees are fiduciaries, but other fiduciaries may include:
The scope of the fiduciary duty depends on the undertaking and circumstances.
Not every duty owed by a fiduciary is itself fiduciary. For example, the duty of care is distinct from the core duty of loyalty.
A fiduciary must not place themselves in a position where:
Liability may arise even where:
Fully informed authorisation may prevent liability.
A fiduciary must not make an unauthorised profit from their position.
Examples include:
Possible remedies include:
Key authorities include:
The self-dealing rule generally prevents a trustee from purchasing trust property.
The transaction may be set aside at the beneficiary’s instance, even where:
The fair-dealing rule applies where a trustee purchases a beneficiary’s beneficial interest. The trustee must demonstrate:
New trustees may be appointed under:
Candidates should consider:
A trustee may retire where statutory conditions are satisfied, commonly requiring:
A trustee may be removed through:
The court’s central concern is proper administration and beneficiaries’ welfare, not punishment of the trustee.
Under section 19 Trusts of Land and Appointment of Trustees Act 1996, qualifying beneficiaries may direct retirement and appointment where:
This reflects principles similar to Saunders v Vautier.
Under section 1 Trustee Act 2000, a trustee must exercise such care and skill as is reasonable in the circumstances, considering:
The statutory duty applies to specified functions, including many investment and delegation decisions.
The trust instrument may modify its application.
Trustees generally have the same broad investment power as an absolute owner, subject to:
Trustees must consider:
Before exercising investment powers, trustees should ordinarily obtain and consider proper advice from a suitably qualified person unless they reasonably conclude that advice is unnecessary or inappropriate.
Trustees cannot follow advice mechanically. They remain responsible for the final decision.
Ethical or non-financial considerations may be relevant, but trustees must remain within:
Trustees may delegate certain functions, subject to statutory and trust-instrument requirements.
They may need:
Trustees may remain liable for failure to exercise reasonable care in appointment or supervision.
Where property is held for a minor, trustees may apply income for the minor’s:
Unused income may be accumulated according to the statutory and trust terms.
Once the beneficiary becomes entitled to income, accumulated and future income must be dealt with accordingly.
Trustees may apply capital for the advancement or benefit of a beneficiary with a prospective or vested interest.
Candidates should understand:
Trustees of a private trust generally act unanimously unless the trust instrument provides otherwise.
A majority cannot ordinarily override a dissenting trustee.
All trustees should:
Trustees must balance fairly the interests of different beneficiaries, including:
Impartiality does not require identical treatment. It requires proper regard to the different interests created by the trust.
Trustees must:
Beneficiaries do not have an automatic proprietary right to every trust document. Disclosure is controlled by the court’s supervisory jurisdiction and depends on the document and circumstances.
Key authority:
A breach occurs where a trustee:
A trustee may be liable even if acting honestly.
The principal aim is to restore the trust fund to the position it would have occupied but for the breach.
Potential relief includes:
The required causal connection depends on the nature of the duty and breach.
Key authorities include:
Trustee liability is generally personal rather than automatically collective.
A trustee may be liable where they:
A trustee is not automatically liable merely because a co-trustee acted wrongly, but passive acquiescence may create liability.
A trustee who pays more than their fair share may seek contribution from another liable trustee.
Full indemnity may be appropriate where another trustee:
The court assesses relative responsibility.
A beneficiary may be unable to complain about a breach where they:
Consent is ineffective where:
A trust instrument may exclude liability for some breaches.
Under Armitage v Nurse, a clause may generally exempt negligence, including serious negligence, but cannot validly exclude liability for the trustee’s own fraud or dishonesty.
A professional drafting a broad exemption clause may have separate regulatory and negligence obligations to ensure the settlor understands its effect.
The court may relieve a trustee wholly or partly where the trustee:
All three aspects are important.
Honesty alone is insufficient. A professional trustee may find it harder to establish that unreasonable conduct should be excused.
The ordinary limitation period for many breach-of-trust claims is six years.
No ordinary limitation period applies to certain actions involving:
For future interests, time may not begin until the beneficiary’s interest falls into possession.
Candidates should also consider:
Knowing receipt is recipient liability arising where a person:
The recipient must receive the property for their own benefit, rather than merely handling it ministerially.
From September 2026, the specification expressly uses the term knowing receipt.
Key authority:
Dishonest assistance requires:
The trustee’s own dishonesty is not required.
The test considers:
Key authorities include:
| Knowing receipt | Dishonest assistance |
|---|---|
| Requires beneficial receipt of property | No receipt required |
| Focuses on unconscionable retention or dealing | Requires dishonest assistance |
| Proprietary connection is central | Participation in breach is central |
| Recipient liability | Accessory liability |
A person may potentially be liable under both doctrines where the facts satisfy both.
An order requiring the defendant to pay money or account personally.
An assertion that an asset or substitute belongs beneficially to the claimant.
Advantages of a proprietary remedy may include:
A proprietary remedy requires an identifiable proprietary base.
Identifying the original asset as it moves from person to person.
Identifying a substitute asset representing the original property.
Tracing is a process, not a remedy. After tracing, the claimant must establish a legal or equitable remedy.
Common-law tracing is relatively restrictive. It generally requires:
Equitable tracing is more flexible and can operate through mixed funds.
Equitable tracing traditionally requires:
It may permit tracing through:
Where a trustee mixes trust money with personal money, equity presumes that the trustee spends their own money first.
This is associated with:
If the trustee buys an asset with a mixed fund, the beneficiary may potentially claim:
Key authority:
Where trust money enters a mixed account and withdrawals reduce the balance:
Example:
The proprietary claim against the account is ordinarily limited to £2,000, although a personal claim may remain.
Where money belonging to multiple innocent beneficiaries is mixed and lost, distribution may be:
The traditional first-in, first-out rule in Clayton’s Case may be displaced where its application would be impractical or unjust.
Tracing may fail where misappropriated money is paid into a genuinely overdrawn account because the payment merely discharges debt and leaves no identifiable substitute.
However, tracing may be possible where:
This is fact-sensitive.
A bona fide purchaser of the legal title for value without notice takes free of an equitable proprietary interest.
The defence requires:
A volunteer cannot rely on this defence, although they may have a change-of-position defence to some personal restitutionary claims.
An innocent recipient may have a personal defence where:
The defence is generally unavailable to a dishonest recipient.
It does not necessarily defeat a subsisting proprietary claim to identifiable property.
Prioritise:
For each scenario, ask:
The controlling source is the official SRA FLK2 specification. For assessments from 1 September 2026, the revised specification expressly clarifies Re Rose, Strong v Bird, Choithram, automatic and presumed resulting trusts, knowing receipt and dishonest assistance.
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