17: Establishing and managing a trust

Question 1

what are the three elements for creating an express private trust?

Answer 1

certainty of intention
certainty of subject matter
certainty of objects

Question 2

if a clause of a will said ‘£100,000 to my wife in the hope that she will do something to better her life’, a trust would not be created. why?

Answer 2

because there is uncertainty of intention

Question 3

if there is no clear intention to the recipient (the trustee), what can the trustee do?

Answer 3

they can take the property as a form of a gift for their own personal benefit and not in the trust

Question 4

what does it mean by certainty of subject matter?

Answer 4

in the trust, it must be certain what property exactly is trust property and must be identified precisely.

for example, you cannot just say ‘some of the shares’. this must be specified to say ‘10% of apple shares i own’

Question 5

‘£100 to my grandson bob and then at a later stage in 50 years, some more shraes to my grandson bob’ - is this an acceptable clause in a will?

Answer 5

yes, as long as the initial clause is certain of subject matter.

Question 6

what does certainty of subject matter mean in terms of interest in property?

Answer 6

it must be ascertained what the interests are so the beneficiaries know how to properly enjoy the trust property

Question 7

a trust for the benefit of “my friends”

a trust for the benefit of “my children”

which is certain of objects

Answer 7

friends are objective and we would not be able to discover who the ‘friends’ are

children can be identified and therefore would pass the certainty of objects

Question 8

can express private trusts be created both in writing and orally?

Answer 8

yes

Question 9

how are express private trusts usually created

Answer 9

in writing by deed

Question 10

what is the ‘law against perpetuities’. please list meaning and date (2)

Answer 10

it is a law that states that non-charitable trusts created after the 6th April 2010 cannot last more than 125 years.

After this time is up, the trustees must bring the trust to and end and trust property must be transferred to the remainderman in absolute ownership.

Question 11

which 2 trusts MUST be created in writing?

Answer 11

• trusts of estates or interest in land, signed by settlor OR declaration of trust signed by trustees
• settlement of exiting trust interest, signed by person diposing of interest

Question 12

what are the two ways a completely constituted trust is formed?

Answer 12

1. A valid declaration that the settlor has transferred ownership of the trust property to the trustees, and so the trustees hold legal ownership over the properties
2. A declaration that the settlor hold the property on a trust for the beneficiaries

Question 13

if the trust is not completely constituted, is there a trust in place?

Answer 13

no

Question 14

who CANNOT be a trustee

Answer 14

someone of unsound mind

Question 15

when can a minor NOT be a trustee (1)

Answer 15

trust of land

Question 16

can a person who is not resident in the UK be a trustee?

Answer 16

yes

Question 17

if land is settled in a trust there must be at least _ trustees

Answer 17

2

Question 18

legal ownership of land is limited to a maximum of _ persons at any one time

Answer 18

4

Question 19

what type of co ownership do trustees have legal title to the trust property

Answer 19

joint tenants

Question 20

who appoints the first trustees?

Answer 20

the settlor

Question 21

can the settlor appoint and remove new trustees?

Answer 21

yes, provided the trust deed provides express power to appoint new trustees

Question 22

if the trust deed provides express powers to appoint trustees to someone other than the settlor, what is this person called?

Answer 22

protector of the trust

Question 23

do trustees have the power to appoint new trustees and remove current ones?

Answer 23

yes

Question 24

trustees have ____ powers to appoint new or additional trustees and replace existing ones

Answer 24

statutory

Question 25

if a trustee has been outside of the UK for 10 months, do the remaining trustees have the power to appoint a replacement trustee?

Answer 25

no, it must be for a period outside of the uk for 12 months or more

Question 26

if a trustee becomes bankrupt, is this an acceptable reason to appoint a replacement trustee?

Answer 26

yes

Question 27

beneficiaries can appoint new trustees but under what two conditions?

Answer 27

• if no person is expressly nominated in the trust deed to appoint trustee
• all beneficiaries are all in agreement / absolutely entitled, and of full capacity

Question 28

is there a statutory power for courts to nominate a trustee?

Answer 28

yes, in certain circumstances

Question 29

what are the 4 categories of people who MAY have the power to appoint/ replace trustees

Answer 29

• settlor
• trustees
• beneficiaries
• courts

Question 30

what are the two main powers of trustees?

Answer 30

power of maintenance

power of advancement

Question 31

what is power of maintenance?

Answer 31

this is where a trustee holds property on trust for the minor and may excercise powers to make payments out of the income of the property in the benefit for education, benefit or maintenance of the minor

Question 32

in the power of maintenance, the income used to benefit the maintenance/education of the minor has a term. this is…?

Answer 32

intermediate income

Question 33

when exercising the power of maintenance, the trustee must take into account the minor’s: (pick 3)

• age of the beneficiary
• the beneficiary’s income from other sources
• the beneficiary’s parent’s request for income for themselves
• the benficiary’s overall requirements

Answer 33

• age
• income from other sources
• overall requirements

Question 34

what happens to income that is not used for maintenance?

Answer 34

this income is accumulated and added to capital.

once the minor reaches the age of 18, they will be entitled to this capital and income arising after that.

Question 35

does powers of maintenance apply to trust income or trust capital?

Answer 35

trust income only

Question 36

what is powers of advancement?

Answer 36

trustees have the power to apply to trust capital to a presumptious beneficiary (in advance), even if the beneficiary receiving capital is conditional

Question 37

does the law of perpetuities apply to non-exhaustive discretionary trusts?

Answer 37

no

Question 38

does the law of perpetuities apply to charitable trusts?

Answer 38

no

Question 39

do beneficiaries have right to variation of the trust?

Answer 39

yes, if they all collectively agree to vary the terms of the trust, or bring together to end of the trust

this is because they are, in effect, owners of the trust property

Question 40

provided there are no terms in the trust deed that say otherwise, can a trustee vary the terms of a trust?

Answer 40

no

Question 41

if not all beneficiaries agree to a variation of the trust, and there is no powers for the trustee to vary the terms of the trust, how else can there be a variation of trust?

Answer 41

by application to the court

Question 42

if the trust is varied by application to the court but one of the beneficiaries refuses to agree to the variation, can the court ultimately make the variation?

Answer 42

no.

Question 43

are trustees personally liable for loss suffered by the trust?

Answer 43

yes

Question 44

a trustee pays money to the wrong person. is this a breach of trust?

Answer 44

yes

Question 45

a trustee make a unauthorised investment into a high risk asset class. is this a breach of trust?

Answer 45

yes

Question 46

if there is breach of trust, what are the two remedies for the beneficiaries?

Answer 46

recovery of property

damages

Question 47

can trust property be recovered from a bona fide purchaser?

Answer 47

no

Question 48

can a minor be a trustee of trust containing land property

Answer 48

no