Requirements for Creating Inter Vivos and Will Trusts

1.) Inter Vivos Trusts

No formality is required for the creation of a trust if the property involved is in

personalties, i.e. tangible personal movable properties, such as vehicles, shoes,

television, etc. including money. What is essential is that, the manifestation of the

intention to create a trust on the part of the settlor must be very clear and mere

intention to benefit an imprecise person will not be sufficient.

If the property is realty (i.e. immovable property, such as land), the intention to benefit

someone must be evidenced in writing as required by the Statute of Frauds, Section 7;

which requires that any declaration of trust relating to land to be evidenced by a

memorandum in writing signed by the party creating the trust.

In Re Estate of The Late Gedion Manthi Nzioka (Deceased)[2015]eKLR Her Ladyship

“For gifts inter vivos , the requirements of law are that the said gift may be

granted by deed, an instrument in writing or by delivery, by way of a declaration

of trust by the donor, or by way of resulting trusts. Gifts of land must be by way

of registered transfer, or if the land is not registered it must be in writing or by a

declaration of trust in writing. Gifts inter vivos must be complete for the same to

be valid. In this regard it is not necessary for the donee to give express acceptance,

and acceptance of a gift is presumed until or unless dissent or disclaimer is

signified by the donee.”

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The words “signed by some person who is able to declare such trust or by his will”, is a

clear indication that there are some persons who do not have capacity to declare inter

vivos trust or by will.

Failure to comply with the above formalities may be fatal as the trust will be rendered

unenforceable. Also note that, Writing is not required in respect of constructive and

resulting trusts in realty since these are implied and arise independently of the exercise

of the will of the parties.

The Law of Contract Act, Chapter 23 of the Laws of Kenya provides in Section 3 that:
“No suit shall be brought upon a contract for the disposition of an interest in land
unless-
(a) the contract on which the suit is founded –

(i) is in writing.

(ii) is signed by all parties thereto; and

(b) the signature of each party signing has been attested by a witness who is present
when the contract was signed by such party.

Provided that this Section shall not apply to a contract made in the course of a public
auction by an auctioneer within the meaning of the Auctioneers Act (Cap 526); nor
shall anything in it affect the creation of a resulting, implied or constructive trust.”

2) Capacity to Create Trust

In order to create a valid express trust, part of the requirements is the legal capacity of

the settlor, whether individual, corporation or statutory bodies, to create it. Related to

this is the capacity of a person to hold interest in real property. Where a person cannot

hold interest in land, this will affect the capacity to create a trust. The situation of

capacity to hold interest in land varies according to the operative law.

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1.) Individual

At common law for instance, an infant is capable of holding a legal interest in landed

property. However, a sale or disposition of such property is voidable and may be

repudiated before the infant attains the age of majority or within a reasonable time after

attaining the age of majority. At common law, 21 years was adopted as the age of

majority and anyone below this age is an infant. Thus, the position of an infant or a

minor who attempts to create a trust, especially in a situation where the trust is not in

his interest, will have the same effect at common law.

Both the Constitution of Kenya 2010 defines “child” as an individual who has not

attained the age of eighteen years and the Children Act, Chapter 141 defines child as

any human being under the age of eighteen years. Consequently, any person of 18 years

of age and above is regarded as of full age and has the capacity to hold legal interest in

real property.

ii.) People with Mental Disability

People with mental disability also cannot validly create or have a trust enforced directly

against them, since their mental deficiency may itself encumber their ability to validly

dispose their properties or make will. Some of the things that may invalidate such trusts

are the possible contradicting instructions of the insane settlor/testator or that he/she

does not appreciate the nature or effect of such instructions. It is however possible to

approach the courts for directions in respect of the settlement to be made on the

property of an insane person. If the trust was created during the time that such an

insane settlor was in his lucid period and he/she fully understands the nature of his act

and the consequences of the same, such trust may be upheld as valid.
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iii.) Statutory and Incorporated Companies

Statutory bodies and incorporated companies can also create trusts if the power to do so

is contained in their enabling law and memorandum of association, otherwise any trust

created will be declared ultra vires. By virtue of the Companies (Amendment) Act, 2017

incorporated companies have legal personality and powers of a natural person of full

age and capacity in the execution of its business and objects. In effect, they can create

trusts without such powers being expressly contained in their memo, the power to do

so may be limited by their memorandum of association or by law.

3. Constitution of Trusts

Constitution of the trust or conveying the subject matter of the trust to the trustee is

vital to the validity of the trust created and failure to constitute a trust passes no interest

to the beneficiary and the will be void. The trust is said to be completely constituted

when the settlor has vested or has done all that is required or necessary to properly vest

the trust property in the trustee. Except the property has been transferred, the trust

cannot be enforced, as equity will not perfect an imperfect gift or aid a volunteer. In

order to constitute a trust, the nature of the trust property (whether personalty of realty)

will determine the mode of doing this. Also, where the settlor is both the settlor and the

trustee, this might affect the mode of transfer.

i.) Constitution of realty

To constitute a trust in respect of realty, the settlor must comply with all necessary

requirements of the law. A cardinal issue here, is that there must be evidence in

writing of such transaction.

registered in the trustee’s name or that he has done all that’s required to of him with

nothing left to be done by the settlor, otherwise, the trust cannot be enforced for lack of

constitution. If the interest to be transferred is an equitable one, the settlor need not vest

the legal title in the trustee since he has none. All that is required is that the disposition

of the equitable interest must be evidenced in writing.

Where the settlor has not transferred the property but has covenanted to settle the same

for the purpose of the trust, the beneficiary may through the equitable remedy of

specific performance.

However, where the settlor declares himself as the trustee of the trust property and now

wears the double cap of both the settlor and the trustee, there is no need to execute any

conveyance to transfer the trust property since he already has the legal interest. The

declaration makes him automatically the trustee of the property and thereby holds the

same for the interest of beneficiary.

In Lady Naas v Westminster Bank Ltd [1940] AC 366, Mr Strauss executed a deed of

covenant by which he agreed to pay Lady Naas such weekly sum which after the

payment of income tax would leave the clear sum of ₤10 per week during her lifetime

until bequest by will or the execution of a settlement on her in an equal or greater sum.

In 1925, the settlement was executed and delivered unconditionally by Strauss as his

deed. The settlement secured to Lady Naas sums greater than those payable under the

deed of convenant. It also contained trusts in her and the settlement was sent to Lady

Naas for execution.

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Lady Naas was abroad when the settlement was delivered, but on her return she agreed

the deed of covenant ought to be destroyed (and replaced by the settlement). She then

went on another long tour, forgetting about the execution of the settlement At trial it

was admitted by the bank that the deed of settlement was unconditionally executed and

delivered by Strauss and that prior to parting with the trust funds the bank had notice

of the deed and its contents.It was argued at trial that it was the settlor’s intention that

he should not be bound by the deed unless and until all parties had executed it.

The Court of Appeal held that at the relevant date, the settlement was no longer

effective as against the bank as Strauss had executed it on the faith that Lady Naas

would also execute it. She hadn’t done so and he was entitled to revoke or withdraw the

settlement.

ii.) Constitution of Personalty

Personalty can be divided into tangible and intangible property. To effect the

constitution of pure personalty, mere delivery of the property suffices. In respect of

intangible property – such as shares, etc., the settlor must have executed the necessary

transfer form for this purpose and the transfer registered in the company’s register.

Where a deed was executed for this purpose but the required transfer form was not

used, the transfer will be ineffective.

In Milroy v. Lord (1862) 4 De G.& J. 264, Thomas Medley assigned 50 shares by

voluntary deed to Samuel Lord upon trust for Milroy’s benefit. Nevertheless, no

transfer of the shares was registered in the company’s books following formalities for

transferring shares. Because of such failure to observe the formalities required, the trust

is incompletely constituted.
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Turner LJ, held that “the settlor must have done everything which, according to the

nature of the property comprised in the settlement, was necessary in order to transfer

the property and render the settlement binding upon him… there is no equity in this

court to perfect an imperfect gift."

4) Covenants to settle

In situations where the settlor has neither constituted the trust nor declared himself as

the trustee of the trust property, there is nothing for the beneficiary to enforce; and no

interest passes to the beneficiary. In some cases however, the settlor may covenant to

settle or transfer the trust property to the trustee, in which case the beneficiary may

enforce such a trust.

The problem however, is that since the agreement to transfer or settle the trust property

is a contractual one, and going by the doctrine of privity of contract, only a party to a

contract can enforce it. In other words, the beneficiary must be a party to the covenant

before he can enforce the same. Where the beneficiary has furnished consideration for

the covenant, he will be able to enforce the covenant both at common law and equity.

However, a beneficiary may enforce a covenant to settle without having furnished any

consideration where the covenant is by deed, as agreements made by deed need not be

supported by consideration in order to be enforced at common law.

5) Exceptions to Equity’s Non-Perfection of Imperfect Gifts

There are circumstances where a trust not completely constituted will be enforced and

constitutes exceptions to the equitable maxims that “Equity will not perfect an
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imperfect gift” and “Equity will not assist a volunteer”. The exceptions are considered

as follows:

i.) The rule in Strong v. Bird

Under this rule, an imperfect gift will be perfected if the legal title has vested in the

donee on the donor’s death. Circumstances under which this can arise are:

a.) Where the donor appoints the donee as the executor.

b.) Where the donee is appointed as the administrator in the case of intestacy.

In Strong v. Bird (1874) LR 18 Eq 315, the stepmother of Bird resided in his house for

which she pays rent to Bird. Bird borrowed the sum of 1,000 pounds from his

stepmother and it was agreed that the loan will repaid by a reduction in the rent paid

until the same was totally liquidated. The stepmother was however paid the reduced

rent twice and afterwards paid the full rent until her death. The stepmother on her

death appointed Bird as her executor and her the next of kin then attempted to recover

the debt from Bird.

It was contended that the conduct of the stepmother is making full payment of rent and

stopping paying the reduced rent does not discharge Bird from the debt since Bird has

furnished no consideration to entitle him to be discharged from the debt.

The court held that in making Bird her executor, the stepmother intended the loan to be

a gift to Bird since it will be the duty of Bird to call in the debts due to his stepmother’s

estate and it cannot be expected that Bird will sue himself, thus resulting in the

cancellation of the debt. It was further held that the fact that the stepmother had

stopped payment of the reduced rent in her lifetime was indicative of her donative

intention till she died.

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For the rule in Strong v. Bird to apply, the following conditions must be satisfied:

a.) The donor must have intended to make immediate inter vivos gift to the donee.

b.) The donor’s intention to make the gift must have continued till the time of his death.

c.) The intention of the donor must relate to a specific item

d) The done is appointed the donor’s executor

11) Donatio Mortis Causa

Donatio mortis causa is a gift made in contemplation of death. This type of gift is a

conditional one and takes effect only on the donor’s death. It is upon the death of the

donor that title in the property passes to the donee. The conditions for the validity of a

donatio mortis causa as established in Cain v. Moon (1896) 2 Q.B. 283 per Lord Russell,

are as follows:

i.) The gift must have been made in particular contemplation of death and not in respect

of death some day.

ii.) The subject matter of the gift or means of control or obtaining it must have been

delivered to the donee; and

iii.) The gift must have been made under the circumstances as to show that the property

is to revert to the donor if the contemplated death did not occur. This condition is not

one that is usually expressed but is to be inferred from the surrounding circumstances.

Thus, if the donor recovers from his illness or revokes the gift while alive, the gift fails.

In Benson Mutuma Muriungi v C.E.O. Kenya Police Sacco & another [2016] eKLR F.

GIKONYO J, held that another type of assets which do not form part of the estate of

the deceased is assets subject of a donatio mortis causa, (gift causa mortis or Gift in

Contemplation of Death); such assets pass directly to the donee. A donatio mortis

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causa is a gift made by a person during their lifetime but in contemplation of his

imminent death.

In Michael Murage Njunge v Joseph Gathanwa Njunge [2014] eKLR A. OMBWAYO

terminally ill, and that she had objected to it being disposed away during her lifetime.

The defendant has been in management and control where the proceeds there from he

said used to support their mother. Her interest in the property was for her own

maintenance and support, and she has now passed on, and may of these conditions are

met, since her only objection to the property's disposal was her maintenance during her

lifetime. Whether there was any contrary intention for the property to form apart of

the estate of the deceased would have been properly articulated by the other siblings

who have not made any effort to be party in the suit property despite the length of the

Matter. In absence of their expressed interest, I cannot find there to have been an

intention fort the property to form part of ancestral property of the family”.

iii.) Dispositions under Will

In testamentary dispositions, once the will is duly executed and probate of the same has

been obtained, the beneficiaries are entitled to the gifts, irrespective of whether they are

volunteers or not. Where the executor of the will failed to convey the gifts, the

beneficiaries can sue the executor for specific performance notwithstanding that they

have not furnished any consideration for the gift.

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iv.) Doctrine of Proprietary Estoppel

Under this heading, equity will preclude a person who has made an imperfect gift to

deny or assert a contrary right over such property. Such as where a father asks his son

to occupy a land and the son in consequence thereof, expended large sums of money to

build on the land. The father died without executing any document in favour of the son.

The son’s claim to get the conveyance to himself on the property was upheld.

In Dillwyn v. Llewelyn (1862) 4 De G.F. & J. 517, A father signed a memorandum

leaving his farm to his son. However, this memorandum was not executed by deed. The

plaintiff took possession of the land and built a dwelling upon it at a considerable

expense. This was done with the knowledge and approval of the father. However, the

father died without ever transferring the legal estate to his son. The plaintiff then

claimed an equitable interest in the property from his father’s executor. The issue for

determination was whether the memorandum did not satisfy the formalities required to

pass an estate in land. The courts normally treated such a promise as an imperfect gift,

and equity will not assist a mere donee who has given no consideration for such a

promise by perfecting a gift if it failed.

The court found in favour of the plaintiff. This was not merely an incomplete gift. The

father had made an assurance that the son would receive the fee simple, and in reliance

upon this the son had spent a considerable amount of money. Lord Westbury held that

a donor’s subsequent acts may give a donee rights which he did not acquire from the

original gift. He said the current case was analogous to part performance of a contract;

in spending money, the son had provided valuable consideration. Equity acts upon

what is done not the language of a memorandum. There was a clear intention to convey

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the fee simple to the plaintiff. Therefore, the court ordered the defendant to convey the

freehold to the plaintiff.

v.) Statutory Exceptions

As treated above, an infant or minor cannot hold a legal estate in realty or a legal estate

created in their favour. The conveyance of realty in favour of an infant or a minor has

the effect of operating as a declaration of trust in favour of the minor, while the legal

estate remains vested in the donor/settlor who now becomes a trustee for sale of the

legal estate in favour of the minor.

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