In some ways, you could almost say that a trust is like a spouse. The term “spouse”, although represented by an individual, really depicts a relationship between two people. The law, in Jamaica anyway, no longer requires the formality of a wedding ceremony, for the term to be applicable to two people. Instead, the court will look at the circumstances: that is, the relationship between the two people (and its duration) to determine whether they can be said to be the other’s spouse. A trust is a little like this. Trusts, in Jamaica, unlike companies, are not persons. They have no separate legal personality. The trust is really the relationship and, in most cases, there is no need for formality to create the relationship. If the relationship is not real, the trust will be invalid, void or where a deliberately false narrative was created, it will be characterised as a “sham” or “illusory”.

The Trusts Act, 2019, which, to a large extent, codified the common law principles of the law of trusts, provides that a trust is the relationship between at least one person (the trustee) and certain property (the trust property) which the trustee holds for the benefit of another person or persons (the beneficiary) or for a designated purpose.

For the trust to exist, certain key features must, therefore, be present:

(a) There must be a trustee;

(b) There must be property that is held by or on behalf of the trustee but is held separately and does not form a part of the estate of the trustee;

(c) There must be a person or a purpose that will benefit from the property, other than the trustee herself;

(d) The trustee must be the one with the actual power and the duty to deal with the trust property; and

(e) The trustee must be required to account for the management and administration of the trust property.

A trust needs not be created in writing, except where it deals with land or is a unit trust. It can be created by an oral declaration, an instrument in writing, by conduct or in any other manner whatsoever. The Trusts Act makes it clear that no technical expressions are needed for the creation of a trust. This means, therefore, that the law looks at the particular circumstances, just as with spouses, to determine whether the characteristics and features required for a trust are present.

Fundamentally, there should be “3 C’s” to establish that a trust was created, which are as follows:

(a) Capacity: the person creating the trust (the settlor) must be a legal person who, in the case of an individual, is of full age and capacity, and in the case of a body corporate is permitted (or at least not prohibited) by its governing documents to create a trust;

(b) Certainty: the terms of the trust must be sufficiently certain as to the intention of the settlor to create the trust, the property to which the trust is to attach and the persons intended to benefit or the purpose of the trust; and

(c) Constitution: title to the property must vest in the trustee or be held on its behalf such that it is the trustee who effectively controls the trust property. Although the settlor can be one of the trustees or one of the beneficiaries, the settlor cannot be the sole trustee and, at the same time, its sole beneficiary. Also, given the importance of the trustee exercising control over the property, care should be taken with respect to the extent of any powers reserved to the settlor as this could affect whether the trust is found to be a genuine relationship under law or just a sham.

Having a trust that is a real relationship can be very beneficial. The tax advantages of a trust (as the trust property no longer forms a part of the assets of the settlor) are often the first thing that people think of. However, this is not the only benefit of a trust. A trust can be used to ensure that a loved one is properly cared for after your death, whether this is a child or a disabled family member or other dependent. It can also be used to protect your assets from risk or to preserve wealth by, for example, restricting access to it by a loved one who lacks money management skills or experience or preventing it from falling into the hands of someone outside the family or from being split up between family members. A trust can also provide ready access to funds in the event of death as well as a measure of privacy since assets held in trust do not form a part of your estate and are therefore not subject to probate which become a matter of public record. These benefits, however, flow from the real relationship.

It would be very sad indeed if these benefits were lost because the relationship was not created in line with correct legal principles and was eventually found to be fake.

Hilary Reid is a partner at Myers, Fletcher & Gordon and is a member of the firm’s Commercial Department. Hilary may be contacted via hilary.reid@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.