A declaration of trust arises when the owner of an interest in property declares himself or herself to be trustee of that interest for the benefit of someone. What does it take to make such an arrangement enforceable? Assume a gentleman is entertaining a woman many years his junior. Towards the end of the evening he sends her a text as she sits across from him: “I am holding the house for you and for you alone.” He sketches a rough plot plan on her cocktail napkin, initials it, places an engagement ring on the napkin, and slides the napkin back over to her side of the table. The next day her lawyer phones the gentleman and says that his client intends to seek enforcement of the gratuitous declaration of trust. Let’s see if there is a case to be made.

Non-relevance of absence of formal conveyance of legal title. It has long been settled law that there need not be a conveyance of legal title from the settlor to himself/herself as trustee for a declaration of trust to arise and be enforceable. See generally 1 Scott & Ascher §3.3.1. Pre-declaration the legal title was in the settlor. Post-declaration the legal title is still in the settlor. In each case, as to the world the settlor-trustee is the legal owner of the subject property. In the Comment to §201 of the Uniform Powers of Appointment Act there is the assertion that a declaration of trust “necessarily entails a transfer of legal title from the owner-as-owner to the owner-as-trustee….” No authority is supplied for this general proposition, because there is none. So far so good for the woman.

Non-relevance of absence of consideration. See generally 1 Scott & Ascher § 3.1.1.

Absence of merger. Had the gentleman, himself, been the only intended trustee and the only intended beneficiary there would be no trust in any case, there being a continuing merger of all interests in the gentleman in his individual capacity. Merger is not an issue in this situation, assuming the woman is the intended beneficiary.

Statute of Frauds. In England before 1676, a trust of real or personal property, with some exceptions could be declared by word of mouth. In that year, however, Parliament enacted a statute commonly known as the statute of frauds. Section 7 provided that “all declarations or creations of trusts or confidences of any lands, tenements, or hereditaments shall be manifested and proved by some writing signed by the party who is by law enabled to declare such trust, or by his last will in writing, or else they shall be utterly void and of none effect.” See generally §8.15.5 Loring and Rounds: A Trustee’s Handbook (2022). The statute did not require that a trust of land be created by a written instrument, merely that it be proved by one. Thus, a writing—perhaps even an oral admission in open court or a revoked will—whose purpose is to assert the unenforceability of an oral trust of land may itself constitute a writing that satisfies the statute's requirements, provided it contains a direct or indirect acknowledgment or admission of the trust's existence. Either by case law or by statute, some form of §7 has found its way into the law of most U.S. jurisdictions. The writing must show with reasonable definiteness the trust property. It also must show the trust beneficiaries and the extent of their interests or the purposes of the trust. For declarations of trust, the writing must be signed by the settlor/trustee. There is no requirement that the settlor/trustee execute a separate writing conveying the property to the trust. Persuading the equity court that the text and scrawls on the cocktail napkin satisfy the statute’s writing and signing requirements will be a challenge, but not an impossible one.

Absence of donative intent. “This is absurd,” the gentleman complains, “my sole intent was to induce her to do what she did not seem otherwise inclined to do that evening, not to give away the family home that I have just inherited from my dear mother.” An admission of common-law fraudulent conduct on his part perhaps? The gentleman may have just lost his day in equity court on the intent issue, maybe even on the writing and signing issues. “He who comes into equity must come with clean hands” goes one of equity’s signature maxims.

Constructive trust doctrine. The gentleman panics and conveys the real estate to his brother. Not a good idea. If the gratuitous declaration turns out to be enforceable, the gentleman, as trustee, will have breached his fiduciary duty to his lady friend by conveying out the trust corpus to a non-beneficiary. She is entitled to have the equity court impress a constructive trust on the real estate pending a judicial sorting out of all issues. The poor non-BFP brother.

Cross-reference. For the mechanics of funding a trust generally see §2.1.1 of Loring and Rounds: A Trustee’s Handbook (2022), available at https://law-store.wolterskluwer.com/s/product/loring-rounds-a-trustees-handbook-2022e-misb/01t4R00000OVWE4QAP.