For a trust created during the settlor's lifetime, the settlor may appoint himself as trustee
A worked RES examination question on express trusts, from our Paper 1 bank — with the rule it turns on, and why each of the four options is right or wrong.
The question
Mr Raymond wants to set up a trust over a shophouse for his young daughter during his lifetime and, to save on fees, to act as the trustee himself. Over coffee, his friend says he plans to do exactly the same thing — but through his will, so that the trust for his own children takes effect only after he has died. Both men like the idea of keeping matters in their own hands and sparing the estate a professional trustee's fees, and each asks whether he may be his own trustee.
Which statement is correct?
The answer, and why
Answer: A
The rule. For a trust created during the settlor's lifetime, the settlor may appoint himself as trustee. A testamentary trust takes effect only on the settlor's death, so by definition he cannot then serve as its trustee.
Why A is correct. Mr Raymond's trust is inter vivos, so he may hold as trustee. His friend's trust arises through his will and operates only once he has died, so he cannot be its trustee.
The other options.
- B denies both. It confuses the rule that a trustee owes duties to the beneficiary with a supposed bar on the settlor serving — there is no such bar for a living trust.
- C allows both. It overlooks that a dead settlor cannot act as trustee of his own testamentary trust.
- D reverses the pair, allowing the impossible case and forbidding the permitted one.
Exam note. Ask when the trust takes effect. A living settlor can wear both hats; a testamentary settlor is, by the time the trust bites, unavailable.
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