Trusts are a cornerstone of modern property and family planning in the United Kingdom. When a person (the settlor) wishes to place assets into the hands of others to be managed for beneficiaries, the law requires a precise framework to avoid disputes and ensure the intent is honoured. Central to this framework are the so‑called three certainties of trust. In essence, without these certainties, a trust can fail, and the assets may instead remain with the settlor or fall into an unintended category. This article unpacks what are the three certainties of trust, how each one works in practice, and what this means for drafting, advising, and applying trusts in real life.
What are the three certainties of trust: an overview
The three certainties of trust are intention, subject matter, and objects. Together, they ensure that a trust is clearly conceived, its assets are properly allocated, and the beneficiaries or class of beneficiaries are identifiable. Here is a quick overview of each certainty before we dive into the details:
- Certainty of intention – the settlor must intend to create a trust, not merely make a gift or confer a favour.
- Certainty of subject matter – the assets to be held on trust must be clearly defined or capable of being defined.
- Certainty of objects – the beneficiaries or the class of beneficiaries must be ascertainable.
Certainty of intention
What counts as intention to create a trust?
Intention is not a mood or a fleeting idea; it is a real intention to impose legally binding duties on trustees to manage the assets for the benefit of designated beneficiaries. The courts look for outward expressions of intention that show the settlor’s purpose to create a trust. Words alone can suffice, but conduct can also demonstrate intention in appropriate circumstances. Phrases like “on trust for”, “for the benefit of”, or “my trustees shall hold on trust” are commonly used to signal intention. Yet intention can be inferred from the surrounding circumstances when the conduct of the parties makes the purpose clear.
Key authorities and practical implications
Two classic authorities shape the understanding of certainty of intention in English law:
- Milroy v Lord (1862) – established that a trust cannot be created merely by wish or intention; the transfer of legal title must be effective. If the settlor’s arrangement fails to transfer or declare the trust properly, the trust does not take effect. This underscores that intention alone is not enough; it must be coupled with a workable mechanism to carry it out.
- Re Adams & Kensington Vestry (1884) – emphasised that the language used can declare a trust, and evidence showing the settlor’s intention is a central part of deciding whether a trust exists. The case helps explain how explicit wording can be decisive, but it also recognises that intention can be proved by behaviour and context.
Common pitfalls in intention
- Using vague or ambiguous language such as “for the benefit of” without clarifying the manner in which the assets should be held or distributed.
- Describing a gift as “for the purpose of” a particular result, which can blur the line between a gift and a trust.
- Failing to address what happens if the intended beneficiaries are dead or if the assets are insufficient to fulfil the intended purposes.
Certainty of subject matter
Defining the assets that go into the trust
Subject matter refers to what exactly is being held on trust. The assets must be clearly identifiable or capable of being identified. In land, this is relatively straightforward: the exact plot or parcel of land must be specified. For chattels, shares, or cash, the property must be described with sufficient clarity to prevent disruptive ambiguity.
Land versus personal property
When land is involved, the transfer of land into trust is often a formal process requiring proper conveyancing. The subject matter must be certain to avoid a situation where the trustees do not know what property they are meant to manage. In the realm of personal property, uncertainty can arise if the assets are not identified or if they are described only in broad terms (e.g., “the assets in my estate” without specificity).
Notable illustrations
- Re London Wine Co (1925) – a famous example illustrating that while the intention to hold wine in trust may be present, the wine itself must be identifiable as the subject matter. Where bottles were placed in storage but not segregated or identified for particular beneficiaries, the court found the subject matter insufficient for a valid trust. The case underscored the importance of identifying the exact assets that are to be held on trust.
- More modern practice emphasises clarity in describing the trust fund, including the precise numbers or holdings, and ensuring records track the assets that form the trust corpus.
Practical drafting tips for subject matter
- Identify the assets explicitly in the trust instrument or provide a clear mechanism to identify them later (e.g., specific shares by name or ISIN, cash amounts, or clearly described property).
- When possible, segregate assets intended for the trust to avoid confusion with other property.
- For mixed asset pools, provide an apportioning method that makes the subject matter determinable at all times.
Certainty of objects
Who benefits from the trust?
The third certainty concerns the people or entities entitled to benefit from the trust. The beneficiaries or the class of beneficiaries must be identifiable with reasonable certainty. This requirement safeguards against vacuous trusts and ensures the trustees know who may benefit and in what circumstances.
Is/are tests and complete list approaches
Two important tests shape certainty of objects in English trusts law:
- Is/are test – particularly relevant in discretionary trusts, where the class of beneficiaries may be broad. The court asks whether it is possible to say, on the facts, whether a particular individual is a member of the class.
- Complete list test – applicable to fixed trusts. The class of beneficiaries must be capable of being completely determined and a comprehensive list must be identifiable. If the class is too wide or indefinable, the trust may fail.
Key cases and their implications
- McPhail v Doulton (1971) – the House of Lords endorsed the is/are test as the working standard for discretionary trusts, replacing the stricter “complete list” approach for such trusts. The decision allows for more flexibility in defining beneficiaries, provided it is possible to say who qualifies as an eligible beneficiary.
- Re Baden’s Deed Trusts (No. 2) (1973) – introduced the concept that the class of beneficiaries must be ascertainable in principle and can be defined by a standard of description, not just a precise list of individuals.
- Re Gulbenkian’s Settlement (1970) – clarified the is/are test, emphasising the need for a definite and closed class of beneficiaries, while recognising some flexibility in defining the class for discretionary trusts.
What about charitable trusts?
Charitable trusts operate within a distinct framework. While the three certainties still apply conceptually, the doctrine of “public benefit” governs the objects. The beneficiaries are not individuals but the public or sections of the public, and the courts assess whether the purpose benefits the community in a manner that satisfies charitable objectives. In practice, charity law requires clarity about the aims and the scope of beneficiaries, but the public nature of the class adds different interpretive levers for certainty.
Common pitfalls in certainty of objects
- Describing beneficiaries too loosely (e.g., “all my friends” or “the residents of my street”).
- Using words that create ambiguity about class boundaries (e.g., “my adult children” without clarifying what constitutes adulthood for the purposes of the trust).
- Failing to specify mechanisms for updating or dealing with beneficiaries who predecease the settlor or are unborn.
Putting the certainties together: drafting a robust trust
Practical steps for drafters
- Start with a clear statement of intention: declare that a trust is created and identify the trustees’ duties toward managing and distributing the assets.
- Clearly identify the subject matter: list the assets or set out a precise method of identifying them (e.g., “the shares listed in Schedule A” or “the cash in bank account no. XX”).
- Define the class of objects with precision: in fixed trusts, provide a complete list or a very clear description; in discretionary trusts, apply the is/are test to determine whether individuals or classes meet the eligibility criteria.
Sample drafting patterns
- “I declare that X shall hold the property on trust for Y, absolutely, subject to the following trust powers and discretions for Z” – a concise way to express intention and subject matter while allowing for orderly administration.
- “The Trustee shall hold the trust fund on the following terms for the benefit of [identified class], in such shares and in such manner as the Trustee shall determine” – demonstrates both intention and object clarity in a discretionary setting.
What happens if one certainty fails?
Consequence for the trust
If any one of the certainties fails, the trust can fail altogether or fall into a different form of arrangement. For example:
- Failure of certainty of intention may convert the arrangement into an outright gift or simply leave property with the settlor.
- Failure of certainty of subject matter can produce a failure of the trust due to indefinable assets, potentially triggering a resulting trust back to the settlor or the settlor’s estate.
- Failure of certainty of objects may render the trust void (in the case of fixed trusts) or lead to a court’s intervention to determine beneficiaries under the is/are test, with varying outcomes.
Practical examples to illuminate the certainties
Consider a few typical scenarios to illustrate how the certainties operate in real life:
- A trust declared “to hold the family home on trust for my children” may fail if the identity of the children is not clear or if the home’s status cannot be described with certainty. A better approach would be to name the children or describe a definable class (e.g., “my children living at the date of my death”).
- A discretionary trust created “for the benefit of my friends and their children” could pass the is/are test if there is a clear way to determine who qualifies as a friend and which children are included, ensuring the class is ascertainable.
- A charitable trust phrased as “for the relief of poverty” must meet the public benefit criterion and be a legitimate charitable purpose under the Charities Act, with certainty about the charitable objects and the public group intended to benefit.
Charitable trusts and the certainties
Charitable trusts are subject to a slightly different emphasis because their beneficiaries are not private individuals, but the public at large or a defined charitable purpose. Even so, the certainty of intention, subject matter, and objects remains relevant. The court will ensure that the trust is genuinely intended for a charitable purpose, that the assets designated for the charity are properly identified, and that the charitable objects are capable of being performed in a manner that benefits the public.
Common questions about the certainties of trust
Do you need a formal deed to establish a trust?
Not always. Some trusts are declared in writing; others can be created by conduct or implied by a course of dealing. However, formalising a trust in a deed or instrument helps to meet the certainties by documenting intention, assets, and beneficiaries clearly, reducing the risk of disputes later on.
Can trusts be created informally?
Certain types of informal arrangements can create a trust, but the three certainties must still be satisfied. In many cases, a lack of formality increases the likelihood of ambiguity about intention, subject matter, or objects.
How does one test for certainty in complex arrangements?
In modern trust practice, courts are more inclined to interpret language flexibly, recognising that arrangements can be sophisticated, involve multiple parties, and include discretionary powers. The overarching aim is to ensure that the settlor’s intention is translated into a workable framework that a court can administer if needed.
Conclusion: the practical takeaway
The three certainties of trust—intention, subject matter, and objects—provide the essential structure that allows trusts to function smoothly and predictably. For anyone considering creating a trust, the takeaway is straightforward: be explicit about the purpose and mechanism of the trust, identify the assets with precision, and define the beneficiaries or class with clarity. When these certainties are in place, a trust is far more likely to perform as intended and withstand the test of time, disputes, and changing circumstances.
Further reading and practical considerations
While this article provides a practical overview of what are the three certainties of trust, guidelines and case law evolve. When planning or revising a trust, consult with a solicitor or a qualified professional to ensure that the trust instrument accurately reflects your intentions, complies with current law, and remains robust in the face of future changes in circumstances.
Key takeaways
- The three certainties of trust are intention, subject matter, and objects.
- Intention requires a genuine wish to create a trust, not merely to gift or grant a favour.
- Subject matter must be clearly identifiable or capable of being identified.
- Objects must be ascertainable, with is/are and complete list approaches guiding discretionary and fixed trusts respectively.
- Charitable trusts introduce public benefit considerations but still rely on the certainties for valid operation.
Understanding what are the three certainties of trust equips you to design, implement, and manage trusts that are clear, effective, and legally sound. By foregrounding intention, subject matter, and objects in your drafting, you reduce the risk of future challenges and help ensure your trust serves its intended purpose well into the future.