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For obvious reasons, a trust cannot be formed where a person is both sole trustee and sole beneficiary. Such a person would hold both the legal and the equitable interest, so there would be nothing held in trust.

My question is, what happens if this situation comes about after the trust if formed? E.g. A is sole beneficary and A and B together are the trustees, but then B dies or resigns. Does the trust automatically collapse since A now holds both the legal and equitable interest? Related, is there automatic vesting of the trust property in A if B dies (as opposed to resigns)? Section 40 of the Trustee Act 1925 seems to be silent on this point.

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The trust comes to an end. This is known as the doctrine of merger. See Virgo, The Principles of Equity and Trusts (2020) at [3.5.3]:

In the same way that the person with sole legal and beneficial title to property does not also have an equitable proprietary interest, once an equitable interest has been created, it will be lost if the property is transferred to a person who has sole legal and beneficial title to it. Another way of expressing this principle is by recognizing that one person cannot hold property on trust for only themself: Re Selous [1901] 1 Ch 921, 922.

This is illustrated by Re Cook [1948] Ch 212, in which land was held on trust by a husband and wife for themselves. Since there were two of them, each could hold the legal title to the land on trust for themself and the other. But, when the husband died, the entire interest in the property, both legal and equitable, vested in the wife. It was held that the legal interest had swallowed up the equitable, so that there was a merger of the two interests, and it followed that the trust was terminated. As Harman J recognized, 'you cannot have a trust existing when nobody is interested under it except the trustee, because nobody can enforce it and there is, in fact, no trust in existence' (at 215).

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The Act is silent because...

There is no legal necessity for the settlor, trustee and beneficiary to be different people or organisations. It is sometimes beneficial for an individual to establish a trust in which they are also the trustee and beneficiary; this is perfectly possible in English law. This can be particularly useful for tax purposes.

http://www.estatesortrusts.co.uk/what-are-trustees-and-beneficiaries.html

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  • I was referring to the fact that Section 40 is silent on the point of automatic vesting in the case of the death of a trustee. Note that that article doesn't cover the scenario I was talking about either. I'm aware that one person can be settlor, trustee, and/or beneficiary simultaneously. Indeed this is fairly common. I'm talking about where someone is sole trustee and sole beneficiary, which is not possible (and which that article doesn't claim is possible, on a careful reading of the words).
    – JBentley
    Nov 15 '20 at 22:18

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