Basic Principles Flashcards
Definition of Trust
A trust is where there is a binding obligation placed on a person to look after property for the benefit of another (or for a purpose permitted by law)
Settlor
A person who sets up a trust
Personal Right
Right of beneficiary to enforce the trustees’ duties and seek compensation for any breaches
Proprietary Right
Ownership interest in the trust property itself. Can be enforced against trustees and successors in title
‘Absolutely Entitled’
When a beneficiary’s interest is vested, in possession and not limited in enjoyment
Bare Trust
Where trustees hold on trust for a sole adult beneficiary possessing full mental capacity absolutely (with no limitations or conditions attached)
Fixed Trust
Terms of trust define the share of the trust property which the beneficiary will receive.
Discretionary Trust
Trustees given discretion as to the amounts any beneficiary may receive or whether particular beneficiaries receive anything at all.
Vested Interest
Unconditional interest
Contingent Interest
It is conditional upon happening of some future event that may not happen, or if beneficiary is not yet in existence. (When condition is satisfied, interest becomes vested)
In Possession
Beneficiary will benefit now (can enjoy interest immediately)
In Remainder
Beneficiary will benefit later (can enjoy interest when some other beneficiary’s right to enjoyment expires)
Absolute Interest
Interest in capital
Limited Interest
Interest in income only
Creation of an Express Trust
A settlor can create an express trust in his lifetime by declaring self as a trustee or transferring property to trustees on trust
Person who creates will
Testator or Testatrix
Two types of implied trusts
Resulting Trusts
Constructive Trusts
Resulting Trusts
Trustees hold on trust for the settlor; usually if there is a gap in the beneficial ownership (ie beneficiary never meets contingency, so no where else for beneficial interest to go).
Constructive Trusts
Constructive trusts arise in certain circumstances when it would be unconscionable for the legal owner of property to deny the claimant an equitable interest (ie partner who contributes to the purchase price of a house)
Ending a bare trust
Beneficiary’s can end the trust by calling for a transfer of trust property to themselves or other trustees if ALL the beneficiaries under the trust who could possibly become entitled (ie where there is no other person with a potential interest in the fund):
a. Are in existence and ascertained;
b. Are 18 or more and of sound mind; and
c. They all agree
Law of Succession on a Person’s Death - Administration
Estate dealt with by PRs, who will use estate to pay inheritance tax and debts, and then distribute what is left to persons who are entitled to it.
Law of Succession on a Person’s Death - Wills
s.9 of the Wills Act 1837
s.9 of the Wills Act 1837
A will must normally be made in writing and signed by testator in joint presence of two witnesses, who must then witness testators signature by signing the will in his presence.
Failure of a gift in a will
Gifts in the will may fail due to ademption (testator no longer having possession of specified property at death); lapse (if beneficiary dies before testator) or if a will is witnessed by a beneficiary or their partner (s.15 Wills Act 1837)
