Trust Property; A Legal Link Between Trust Property And Trustee Under The Nigerian Legal System

Trust Property; A Legal Link Between Trust Property And Trustee Under The Nigerian Legal System

Abstract

According to the Blacks law dictionary, 6th edition trust property is defined as any money or property set aside as a trust for the benefit of another and held by a trustee. The trustee is the person vested with the right to hold property in trust on behalf of another called the beneficiary.

The essence of trust relationship is to enable a testator/ settlor who own a legal estate to be able to cater for his immediate family members or his dependants after his demise.

For a trust relationship to be properly constituted, the trust property must be vested in the trustee. The legal link between the trustee and the trust property is the act of vesting the trust property in the trustee. Where this has been properly done, the trustee will be able to deal with the trust property accordingly.

A beneficiary can only lay claim to a trust property that has been properly vested in the trustee. Hence the necessity of examining the legal link between the trust property and the trustee under the Nigerian legal system is sine qua non in order to be able to establish the scope of the operation of trustees in administering trust property under a trust relationship.

Chapter One

General Introduction

1.0.0: Introduction

In most common law system, trust properties are those managed by one person, a group of people or organizations for the benefit of another. The modern rules of equality owe their origin and development to the English court of chancery1 and were formally received into the Nigerian legal system through various statutory enactments. Trust is an institution of equity which is received into the Nigerian legal system and just like all other equitable institutions and remedies, any claim arising from trust must be shown to have an ancestry founded in history and in the practice and precedents of courts administering equitable jurisdiction.

It is a notable fact that the doctrine of equity developed in order to mitigate the harshness of common law, hence the law of trust which is an equitable principle is one of such development. The reception of the English law of trust in Nigeria was not a voluntary act of Nigeria. It was enforced through the Re-english laws received into Nigeria which became operative from the 1st of January, 1900. It should however be noted that before the colonialists imposed their legal system on us, the concept of trust has been in operation under our own customary laws. To this end, one can logically affirm that the reception of the English law of trust into the Nigerian legal system is a blessing since the property to be held by the trustee on behalf of the beneficiary will be administered judiciously without fear of exploitation and even if there is exploitation the maxim ‘equity will not suffer a wrong without a remedy’ will be applied in such a case. Under the common law (legal systems), a trust is a relationship whereby property (including real, tangible and intangible) is managed by one person (persons or organizations) for the benefit of another. A trust is created by a settlor or testator who entrusts some or all of his property to people of his choice (trustee(s) or reoffer to uses). The trustees hold legal title to the property for the benefit of one or more individuals or organizations (beneficiary or cestui que trust) usually specified by the settlor, who hold equitable title. The trustee(s) owe(s) a fiduciary duty to the beneficiaries, who are the beneficial owner of the trust property.

The trust is governed by the terms of the trust document, which is usually written and occasionally set out in deed form. It is also governed by local law. The trustee is obliged to administer the trust in accordance with both the terms of the trust document and the governing law. Trust relationship creates a fiduciary relationship among all the parties to the trust which has regards to property and subjects the person with title to the property to equitable duties to deal with it for another’s benefit, thereby placing a confidence in the trustee for the proper management of the property and the enjoyment of the beneficiary. Trust property is the essence for which trust relationship was created. Without the existence of a trust property alone without the vesting of such property in the trustee does not warrant a valid trust but rather the trust property must be properly vested in the trustee

1.1.0: Background to the Study

The long essay leans on the wall of trust relationship which centers on trust property and trustee under the Nigerian legal system envisaging the legal link between the two concepts. The vesting of trust property in the trustee shall be examined and other related concepts to it under the Nigerian legal system shall not be left out. In the light of the above, recourse shall be made to the definition and examination of trust property and trustee complemented with definitions of other related terms which fall within the scope of this long essay.

1.2.0: Objectives of the Study

This study focused on the below highlighted objectives: a. To examine the concept of trust relationship and its relevancy under the Nigerian legal system b. To examine the concept of trust property and trustee under the Nigerian legal system. c. To examine the rights, powers and duties of a trustee over the trust property d. To establish the nature of rights that exists under a trust relationship. e. To examine the concept of trust and other legal relationships showcasing the distinction between them and the uniqueness of trust over them. f. To examine the concept of vesting trust property in the trustee as the legal link between them and its effect in a trust relationship. g. To draw attention to the need to develop this area of property law so as to make it be in tune with modern reality.

1.3.0: Focus of the Study

This work has its focus on the legal link between trust property and the trustee under the Nigerian legal system by way of establishing the concept of vesting of trust property in the trustee and its effect if properly done or not. It also goes further to examine the different types of trustees and the scope of operation of each type.

1.4.0: Scope of the Study

Discussion on trust relationship centers on trustee(s) and trust property. Hence this study limits it tentacles to the principle of law regulating the relationship between trustees and trust property though with reference to the beneficiaries’ interest in the trust property.

1.5.0: Methodology

This project employs historical, analytical and ethical methods to examine the relevant principles of law on the concept of trust property and trustee under the Nigerian legal system. It examines the issue from the historical perspective to afford the readers historical benefits on the development of legal principles in this area of property law. In carrying out a study like this, the sources of information could be relied on viz: primary and secondary source of information which will be gathered from textbooks both Nigerian and foreign authors, newspapers, law journals, judicial decisions, relevant statutes, law reports, the Nigerian constitution(1999) amongst others. Information gathered from the internet will equally be of immense help.

1.6.0: Literature Review

Various authorities on trust relationship have been consulted in the course of writing this research work and these authorities have immensely contributed to the development of trust agreement. Most writers and judicial decisions on the concept of trust as they relate to the relationship between trustee and trust property has been expressed and a review of this shall be examined.

M.I. Jegede in his book is of the view that trust is an institution received into the Nigerian legal system and like all equitable institutions and remedies, any claim arising from trust must be shown to have an ancestry founded in history and in the practice and precedents of the courts administering equity jurisdiction. He went further to say that one of the distinctive features of a trust is that it provides for a situation in which property is managed by one for the benefit of another. Even though other institutions provide for such property management relationships, notwithstanding that fact, when they are seen and examined in the context of the essential requirement of a trust, the difference becomes clear and the uniqueness of a trust becomes more pronounced. The office of a trustee is important to the smooth administration of a trust. The trust property is vested in the trustee who holds such property in accordance with the terms of the trust.

PROFESSOR KEETON in his book described trust as the relationship which arises where person called the trustee is compelled in equity to hold property, whether real or personal and whether by legal or equitable title, for the benefit of some persons (of whom he may be one and who are termed cestui que trust) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustee but to the beneficiaries or other objects of the trust.

J.O. FABUNMI in his book stressed that if a new trustee is appointed by deed which contains a declaration by the appointor to the effect that the trust property vests in the persons who by virtue of the deed became and are trustees for performing the trust, that declaration without any separate conveyance or assignment operates to vest in those persons the trust property.

MUIZ BANIRE opined that the trust property must be specified with reasonable certainty. If it is not so specified and it is incapable of precise ascertainment, the trust will fail, in the sense that the donee has nothing to hold absolutely and there can be no trust resulting to the estate of the testator since there is nothing to form the subject matter of such a trust. Hence a trust is not properly constituted unless the trust property is properly linked to the trustee i.e. properly vested in the trustee. A trustee cannot deal properly with the trust property until it is properly vested in him.

D.J. BAKIBINGA expressed that mere appointment of a trustee does not, of itself vest property in him. It is of great necessity for the appointment to also provide for the vesting of the trust property in the trustees in order to properly constitute a valid trust. ROGER LEROY MILLER and GAYLORD A. GENTZ offered a definitive description of the concept of trust. They defined trust to mean ‘any arrangement through which property is transferred from one person to a trustee to be administered for the transferor’s or another party’s benefit’. They also defined it as ‘a right or property, real or personal, held by one party for the benefit of another’. They said a trust can be created for any purpose that is not illegal or against public policy. They gave its essential elements which are: a. a designed beneficiary b. a designated trustee c. a fund sufficiently identified to enable title to pass to the trustee. d. actual delivery to the settlor or grantor to the trustee with the intention of passing. They also gave explanation on how a trust should be. They said there is a separation of interest in the trust property. The trustee takes a legal title, which is the complete ownership and possession but which does not include the right to receive any benefit from the property. The beneficiary takes equitable title, which is the right to receive benefit from the property.

1.7.0: Definition of Terms

Trust relationship is not just an area we can discuss without first appreciating the meaning of its basic concept. Ideas are better illuminated and impacted when the basic principles of legal concepts in respect of a subject are well spelt out. Finding meanings to each of the terms to be used in this research make the research work easier. It assists in discussing the subject matter within its confines. The foundation of this project will be laid by bringing out the meaning of the legal terms or concepts associated with trust relationship such as trust, trustee, trust property, vesting etc. However, the definitions here will be brief as the in-depth meaning of each term shall be brought out later on in the subsequent chapters.

i. Trust

The Black’s Law dictionary9 defined the term trust as ‘A right of property, real or personal, held by one party for the benefit of another.’ ‘A confidence reposed in one person, who is termed trustee, for the benefit of another who is called the cestui que trust, respecting properly which is held by the trustee for the benefit of the cestui que trust’.

ii. Trustee

The Black’s law dictionary10 defined a trustee as ‘person holding property in trust. The person appointed, or required by law to execute a trust; one in whom estate, interest or power is vested, under an express or implied agreement to administer or exercise it for the benefit or to the use of another called the cestui que trust’.
Dictionary of English Law11 defined trustee as ‘a person who holds property upon trust’.

iii. Trust Property

The Black’s Law dictionary12 defined trust property as ‘the property which is the subject matter of the trust; The property of which the trust consists. It may be real or personal and the trustee has legal title.’

iv. Cestui Que Trust

The oxford concise English dictionary13 defined beneficiary as ‘a person who receives benefit especially under a trust, will, or life insurance policy’.

Blacks law dictionary14 defined beneficiary as ‘one who benefits from acts of another. A party who will benefit from a transfer of property or other arrangement’.

1.8.0: Conclusion

The administration of the trust property should be treated with kid gloves because of its delicate nature and which if not wisely and properly administered would lead to a loss on the trust estate and the beneficiary, so the contributions of the trustee to the smooth running of the trust property should not be overlooked. Hence the acronym: existence of trust property coupled with the vesting of the property in the trustee on behalf of a beneficiary brings about trust relationship.

Chapter Five

General Conclusion

A trust is a separate legal entity, so the money is generally safer than it would be with a family member. Even a relative with the best of intentions could face a lawsuit, divorce or other misfortune, putting that money at risk. Though they seem geared primarily toward high net worth individuals and families, since they can be expensive to establish and maintain, those of more middle-class means may also find them useful – in ensuring care for a physically or mentally deficient dependent, for example. Some individuals use trusts simply for privacy. The terms of a will may be public in some jurisdictions. The same conditions of a will may apply through a trust, and individuals who don’t want their wills publicly posted opt for trusts instead. In addition, the trustee has a duty to prudently invest the trust property in order to ensure that the income is sufficient to meet the needs of the beneficiaries.

5.0.0: Conclusion

Trusts are established to provide legal protection for the trustor’s assets, to make sure those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes. Trust is an institution of equity which is received into the Nigerian legal system and just like all other equitable institutions and remedies, any claim arising from trust must be shown to have an ancestry founded in history and in the practice and precedents of courts administering equitable jurisdiction. It is a notable fact that the doctrine of equity developed in order to mitigate the harshness of common law; hence the law of trust which is an equitable principle is one of such development. Trust Management helps charities make decisions, by equipping Trustees with the resources, advice and support needed to facilitate good governance of Charitable Trusts.

5.1.0: Recommendation

Recommendations need be made for an improvement in our laws.

1. It is suggested that the provisions of the Act should be amended taking into account the vital differences between our laws and other countries.
2. The provisions of the ISA as regards investment of Trust property funds needs to be revisited this is because it has been argued that the avenues for investment open to the Trust manager as a result of the provisions of the TIA are limited.
3. It is suggested that the more effective the laws are and the more the investors are aware of the investments in a Trust property, more people will invest in the Trust property and this would lead to the growth of the country’s economy and may lead to the eradication of poverty in Nigeria.
4. There should be amendment of EFCC Act, MLA, ACJA and relevant statutes to include provisions on backward tracing.
5. Training of judicial officers to apply principle to the exclusion of 3rd Party interests. Balance should determined by Judges on a case-by-case basis.
6. Increased budgetary allocation to the EFCC and ICPC to enable them effectively carry out extensive (and expensive) tracing. ALTERNATIVELY: Agencies can retain a percentage of recovered monies to fund their operations.
7. Adoption of the Funds Settlement system used in the UK e.g. the Clearing House Automated Payment System used in the UK for funds transfer and exchange electronically monitors all payments made in and out of the UK. In 2015 alone, CHAPS recorded transactions worth over £ 68 trillion. All of these transactions are available for scrutiny.

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