16: Trust law Flashcards
who are the three principal actors of a trust?
settlor, trustee, beneficiary
what are the roles of each person in an express private trust? (i.e role of settlor, trustee and beneficiary)
settlor - place the trust property and set the terms of the trust
trustee - have control over the trust property and ensure the benefit of the trust accrues to the beneficiaries
beneficiaries - benefit from the trust
there are 3 types of express private trusts. what are their names?
bare trust
interest in possession trust
discretionary trust
are there both express and implied terms in an express private trust?
yes
what is a bare trust
a trust that leaves the trustee with no active duties
what are bare trusts sometimes known as?
nominee arrangements
what is an interest in possession trust?
this is where a settlor allows the beneficiaries to enjoy interest in possession over all or some of the trust property
can more than 1 beneficiary enjoy the interest in possession over the same property?
yes
what does it mean when an interest in possession trust can continue successively?
meaning when the time for one beneficiary’s IIP ends, another beneficiary starts IIP
In an IIP, does a beneficiary have immediate enjoyment to the gross income produced by the trust property?
No.
The beneficiary has immediate ENTITLEMENT to the NET income produced by the trust property
Bob is a beneficiary to Dan’s (settlor) IIP trust. Bob is using all the income from the trust property to buy a lambo, even though he has a lot of debt. Rob, the trustee believes he is being irresponsible with the income and should pay off some creditors. Does Rob have the authority to stop him?
no. the beneficiary cannot be prevented by the trustee from enjoying the income of the trust property
where a beneficiary enjoys interest in possession for their own life, the IIP is called ___ ____
life interest
where a beneficiary enjoys interest in possession for as long as someone else is alive, this is called ____ ___ ___ ___
interest pur autre vie
where a beneficiary enjoys an IIP for a specified amount of time or until a specific event, this is called ___ ___
fixed interest
what is a remainderman?
a remainderman is a beneficiary of the trust that the property from the IIP reverts back to.
during the interest in possession, the remainderman is said to have ______ ____
reversionary interest
what two types of reversionary interest are there?
absolute interest
contingent interest
Bob has three kids: Billy, Barbara and Bonnie. Bob settles property on trust in favour of Barbara for life and then for Billy and Bonnie absolutely. Billy has one child, Barbara has no kids, Bonnie has two kids.
- Who is the life tenant for the life interest?
- If Billy and Bonnie die before the end of the life interest is over, what will happen?
- Barbara is the life tenant
2. Billy and Bonnie’s kids will inherit the trust property
what is the difference between absolute interest and contingent interest?
absolute interest is where the trust property under the interest in possession reverts back to the remainderman at the end of the interest in possession.
contingent interest is where the trust property under the interest in possession reverts back to the remainderman at the time that a condition is satisfied (e.g. at the time the remainderman reaches the age of 30), then the interest will vest in them
what is a discretionary trust?
a discretionary trust is one where the beneficiary enjoys no interest or income from the trust property and is up to the discretion of the trustees via the trust deed to allow benefits to flow to the beneficiary
in a discretionary trust, can a beneficiary force a trustee to exercise their discretion?
no
what are the two types of discretionary trusts?
exhaustive disccretionary trust
non-exhaustive discretionary trust
what is the difference between an exhasutive discretionary trust and non exhaustive discretionary trust?
exhaustive discretionary trust - where the trustees have a duty to distribute ALL of the net income from the trust, and have a discretion to distribute it to selected beneficiaries
non-exhaustive discretionary trust - where the trustees have a discretion whether or not to distribute all net income and if so, have the discretion of which beneficiaries they may distribute to.
difference tldr:
exhaustive = discretion is to who it goes to
non-exhaustive = discretion of how much AND who
what is an accumulation trust
a trust where the trustees accumulate the income and manage trust properties. they pay the remainderman the income at the end of the trust period
in a discretionary trust, the beneficiaries enjoy no more than a ____
hope (‘spes’)
in terms of ownership of property in a trust, how is the legal and equitable ownership split?
the legal ownership of the property vests in the trustee
the equitable ownership of the property vests in the beneficiaries
how is the ownership divested in an interest in possession trust?
equitable ownership is vested in the beneficiaries
legal ownership is vested in the trustees
how is ownership divested in a discretionary trust
equitable ownership is in abeyance until the trustee allows the beneficiaries to benefit from the trust property, at which point the equitable ownership is passed to the beneficiaries
when the trust is ended, the legal and equitable ownership will be vested in the _______ and they will become absolute owners of that property
remainderman
if somebody has a history of getting into financial difficulties, a ____ trust might be of benefit
protective
what is a resulting trust? (2)
a trust where no person has been EXPRESSLY identified in the trust deed
property reverts to the settlor
