Legal Updates

A beneficiary of a trust may not terminate the trust as to itself or at all

October 8, 2020

Shares in a real-estate holding company were purchased in trust for four family members, who were also the settlors of the trust, all without a trust deed that would determine the terms of the trust. Five years later, one of the beneficiaries of the trust notified the trustee of the termination of the trust in respect of her and demanded that her share in the company's shares be transferred to her name.
The Supreme Court held that the beneficiary, even though she is also one of the settlors of the trust, is not entitled to terminate the trust or demand a transfer to her of her proportionate share in the RES. A trust may be created by a contractual agreement orally, in writing or by conduct and the definition of the trust and its purposes are binding on the trustee. A beneficiary may not change the terms of the trust after they are determined, unless the possibility of changing such has been set in the terms of the trust. When the settlor of the trust is also the beneficiary this rule does not apply, but in order to change the terms of the trust the change must be made by agreement of all beneficiaries, or the ‘change’ does not obligate the trustee. Even if the trust holds real estate, and here it owns a real estate company and not real estate, the rule enabling each partner in common to terminate the joint holding of real estate does not apply. A trust dies when the condition in the trust terms for its death is met, or when the purpose for which it was established has been achieved. In the absence of a written trust deed, the terms of the trust may be deduced from the intention of the parties. Here no trust deed was created, but its purposes may be learnt from the behavior of the parties, and the purpose here was to create a "voting block" in the company and for tax purposes, which purposes still exist and will continue to exist until the shares are sold.