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Types of Trusts for SQE1

Part of our SQE1 Trusts guide → View the full SQE1 Trusts guide

10 Apr 2026

SQE1 requires you to classify trusts accurately. Knowing whether a trust is express, resulting, or constructive determines everything from how it is created ...

Types of Trusts

Trusts > Types of Trusts

Frequently tested but poorly understood, trust classification determines which legal rules apply, and candidates often confuse the tests for resulting and constructive trusts, leading them to misidentify remedies and beneficiaries.

What Is Types of Trusts in SQE1?

Trusts are classified according to how they arise: express trusts are created deliberately by the settlor's declaration or transfer; resulting trusts arise by operation of law when beneficial interest reverts to the settlor or original owner; constructive trusts are imposed by equity when the circumstances make it unconscionable for a person to retain legal title; and statutory trusts arise by operation of statute. Understanding creation and constitution of trusts is essential, as is familiarity with beneficiaries' rights because different trust types confer different protections on beneficiaries.

Key Principles for SQE1

  • Express Trusts: These are created intentionally by the settlor. The three certainties (Knight v Knight) must be satisfied. Express trusts can be fixed (beneficiaries and their shares are predetermined) or discretionary (trustees have discretion over distribution). They may be created by declaration (if the settlor declares themselves trustee) or by transfer (if the settlor transfers property to another as trustee).

  • Fixed Trusts: The beneficial interests are defined from the outset. For example, "on trust for A, B, and C in equal shares." The trustees have no discretion over distribution; they must apply the income and capital according to the terms. Certainty of objects requires all beneficiaries to be identifiable at the outset.

  • Discretionary Trusts: The trustees have discretion over whom to benefit and in what proportions. Beneficiaries have no right to any specific distribution. The trust must satisfy certainty of objects as defined for discretionary trusts: a beneficiary is within the class if the trustees can determine with certainty whether they satisfy the criteria. Vague or subjective language (e.g., "those I think are needy") will fail.

  • Resulting Trusts: These arise by operation of law when beneficial interest returns to the settlor or reverts to the original owner. A resulting trust is presumed in two situations: when property is transferred to another with no apparent consideration or intention to benefit, and when a trust fails (leaving beneficial interest unaccounted for). The presumption of resulting trust is stronger where personalty is transferred to an unrelated stranger and weaker where property is transferred to a family member (presumption of advancement may apply).

  • Constructive Trusts: These are imposed by equity when the circumstances are such that it would be unconscionable for a person to retain legal title. Common examples include trusts arising from breach of fiduciary duty, trusts imposed on a murderer of the deceased (to prevent unjust enrichment), and trusts arising from common intention in family home contexts (as in Stack v Dowden and Jones v Kernott). The test is whether the conscience of equity's holder is affected.

  • Bare Trusts: A bare trust exists where a trustee holds property on trust for a single adult beneficiary with no conditions. The beneficiary has the right to terminate the trust and demand the property (the Saunders v Vautier principle). Bare trusts are often used as holding trusts for minor beneficiaries.

Exam tip

Candidates often confuse resulting trusts (which arise by presumption when property is transferred without apparent consideration) with constructive trusts (which are imposed when it would be unconscionable to retain title). The key distinction: resulting trusts focus on the transaction and intent at the time of transfer; constructive trusts focus on subsequent conduct or circumstances making retention unconscionable.

How This Appears in SQE1 Questions

A scenario might involve a property transfer: "C transfers her house to D without payment and without written declaration of trust. C and D are not related. Years later, C claims D holds the house on resulting trust for her." The question tests whether you recognize the presumption of resulting trust and can explain the circumstances in which it might be rebutted (e.g., presumption of advancement if D were C's child).

This is a classic SQE1 trap.

Common Mistakes Students Make

  • Confusing the triggers for resulting trusts (reversion of beneficial interest) with constructive trusts (unconscionable retention)
  • Assuming discretionary trusts lack certainty of objects when the criteria are objective; the test is whether the trustees can determine membership, not whether they can list all members
  • Overlooking the distinction between fixed and discretionary trusts when determining the trustees' powers
  • Treating "resulting" and "constructive" as interchangeable; they require different evidence and have different presumptions
  • Misidentifying when the presumption of advancement applies; it applies only in narrow family relationships and is weakened by modern authority

Quick Summary

  • Express trusts are created intentionally and must satisfy the three certainties.
  • Fixed trusts require all beneficial interests to be predetermined; discretionary trusts confer discretion on trustees.
  • Resulting trusts arise by presumption when beneficial interest reverts to the settlor or original owner; the presumption is stronger for unrelated transfers and weaker where presumption of advancement applies.
  • Constructive trusts are imposed when equity's holder would be unconscionable to retain legal title; they are not based on presumption but on the equitable principles governing the circumstances.
  • Bare trusts exist where a single adult beneficiary has absolute beneficial interest with no conditions; such beneficiaries can collapse the trust under Saunders v Vautier.

Want to test this now? Try a few SQE1-style questions below before moving on.

Test Yourself

Test yourself

Quick check questions based on this article.

Question 1

Scenario

A father transfers £80,000 into a savings account held in the sole name of his adult son. The father does not state whether the money is a gift or whether it is to be held for any particular purpose. The son uses £15,000 of the funds to purchase a second-hand car. The remaining £65,000 stays in the savings account. Two years later, the father asks the son to return the money. The son refuses, claiming the transfer was an outright gift. The father argues that the money was only placed in the son's account for safekeeping while the father was undergoing a period of financial difficulty, and that the son holds the money on resulting trust for the father. The son points out that the father never mentioned any conditions or restrictions at the time of the transfer. The father has no written evidence of his intention at the time of the transfer. The father and son have had a strained relationship since the son's divorce eighteen months ago. The father's accountant confirms that the transfer was not recorded as a loan in the father's financial records. The son has since opened a separate investment account using £20,000 from the savings account.

Which of the following best describes the presumption that applies to the transfer of funds?

Question 2

Scenario

A farmer tells his nephew: 'If you work on the farm for me, I will leave the farm to you in my will.' The nephew gives up a secure job in the city and moves to the countryside to work on the farm. He works on the farm without a formal employment contract for twelve years, receiving only modest living expenses. The nephew makes significant improvements to farm buildings at his own expense. The farmer's wife is aware of the arrangement and has never objected. The nephew has turned down several job offers during the twelve years. The farmer dies and his will leaves the entire farm to a national farming charity. The will makes no provision for the nephew. The nephew discovers that the farmer changed his will two years before his death without informing the nephew. The farming charity has been registered as the legal owner of the farm. The nephew remains living in a cottage on the farm by informal arrangement. The charity's solicitor writes to the nephew requesting that he vacate the cottage within twenty-eight days. The nephew has no significant savings. The farm has increased substantially in value during the twelve years due to the nephew's improvements and favourable agricultural market conditions. The farmer had told several neighbours about the arrangement with the nephew, and two are willing to provide witness statements. The nephew seeks legal advice about whether he has any claim to the farm.

Which of the following best describes the nephew's strongest claim to an interest in the farm?

Question 3

Scenario

A settlor transfers fifty thousand pounds to a trustee to hold on trust for the benefit of her niece until the niece attains the age of twenty-one. The trust deed provides that if the niece does not attain twenty-one, the trust fund is to be distributed to the settlor's 'close companions'. The niece dies at the age of nineteen in a road accident. The trustee contacts the settlor's solicitor to determine who should receive the trust fund. The settlor's solicitor advises that 'close companions' is too uncertain to identify any beneficiaries. The settlor herself died two years before the niece. The settlor's will leaves her residuary estate to a cancer research charity. The trustee has been managing the fund prudently and it has grown in value. The settlor's husband, who is the executor of her will, claims the trust fund should pass to the charity as part of the residuary estate. The trustee has received conflicting advice from two different solicitors. The niece's mother, who is the settlor's sister, claims the fund should be distributed to the niece's estate. The trustee wishes to distribute the fund correctly and avoid personal liability.

Which of the following best describes what happens to the trust fund following the failure of both the primary and secondary trust purposes?

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