Basic Principles

Question 1

Definition of Trust

Answer 1

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)

Question 2

Settlor

Answer 2

A person who sets up a trust

Question 3

Personal Right

Answer 3

Right of beneficiary to enforce the trustees’ duties and seek compensation for any breaches

Question 4

Proprietary Right

Answer 4

Ownership interest in the trust property itself. Can be enforced against trustees and successors in title

Question 5

‘Absolutely Entitled’

Answer 5

When a beneficiary’s interest is vested, in possession and not limited in enjoyment

Question 6

Bare Trust

Answer 6

Where trustees hold on trust for a sole adult beneficiary possessing full mental capacity absolutely (with no limitations or conditions attached)

Question 7

Fixed Trust

Answer 7

Terms of trust define the share of the trust property which the beneficiary will receive.

Question 8

Discretionary Trust

Answer 8

Trustees given discretion as to the amounts any beneficiary may receive or whether particular beneficiaries receive anything at all.

Question 9

Vested Interest

Answer 9

Unconditional interest

Question 10

Contingent Interest

Answer 10

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)

Question 11

In Possession

Answer 11

Beneficiary will benefit now (can enjoy interest immediately)

Question 12

In Remainder

Answer 12

Beneficiary will benefit later (can enjoy interest when some other beneficiary’s right to enjoyment expires)

Question 13

Absolute Interest

Answer 13

Interest in capital

Question 14

Limited Interest

Answer 14

Interest in income only

Question 15

Creation of an Express Trust

Answer 15

A settlor can create an express trust in his lifetime by declaring self as a trustee or transferring property to trustees on trust

Question 16

Person who creates will

Answer 16

Testator or Testatrix

Question 17

Two types of implied trusts

Answer 17

Resulting Trusts

Constructive Trusts

Question 18

Resulting Trusts

Answer 18

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).

Question 19

Constructive Trusts

Answer 19

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)

Question 20

Ending a bare trust

Answer 20

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

Question 21

Law of Succession on a Person’s Death - Administration

Answer 21

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.

Question 22

Law of Succession on a Person’s Death - Wills

Answer 22

s.9 of the Wills Act 1837

Question 23

s.9 of the Wills Act 1837

Answer 23

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.

Question 24

Failure of a gift in a will

Answer 24

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)

Question 25

Revocation of a will

Answer 25

A will is revoked by marriage of the testator, destruction of the will with intention to revoke or make a new will which deals with the same property in the first will.