Certainty of Objects Flashcards
Why is certainty of objects necessary for a trust?
A) To ensure that trustees can properly administer the trust
B) Because every trust must have a single named beneficiary
C) Because trustees must distribute the trust equally among all beneficiaries
D) To allow trustees discretion in choosing beneficiaries
A) To ensure that trustees can properly administer the trust
Explanation: Certainty of objects ensures that the trustees know who the beneficiaries are, so they can administer and enforce the trust properly.
What is the test for certainty of objects in a fixed trust?
A) The “is/is not” test
B) The “complete list” test
C) The “any given postulant” test
D) The “reasonable certainty” test
B) The “complete list” test
Explanation: In fixed trusts, trustees must identify all beneficiaries, so the “complete list test” applies (IRC v Broadway Cottages [1955]).
What is the test for certainty of objects in a discretionary trust?
A) The “complete list” test
B) The “absolute certainty” test
C) The “is/is not” test
D) The “all possible beneficiaries” test
C) The “is/is not” test
Explanation: In McPhail v Doulton (1971), the House of Lords ruled that discretionary trusts do not need a complete list, only the ability to say whether a person is or is not a beneficiary.
Which of the following is an example of conceptual uncertainty?
A) “Children” of an individual
B) “Employees” of a company
C) “Friends” of a person
D) “Descendants” of a common ancestor
C) “Friends” of a person
Explanation: Conceptual uncertainty arises when a class is not precisely defined. “Friends” is subjective and has no clear legal definition, meaning it fails the certainty of objects test.
A trust states that “all my close friends” are to benefit from the trust. What is the likely legal outcome?
A) The trust is valid because the trustee can decide who qualifies
B) The trust is invalid because “close friends” is conceptually uncertain
C) The trust is valid because all fixed trusts allow flexibility in defining beneficiaries
D) The trust is invalid because all fixed trusts require evidential certainty
D) The trust is invalid because all fixed trusts require evidential certainty
Explanation: In IRC v Broadway Cottages, a fixed trust requires a complete list of beneficiaries, which is impossible if the class is vague or evidentially uncertain.
A discretionary trust is created for “employees of XYZ Ltd”. A former employee claims they are entitled to benefit. What is the legal test the court will apply?
A) The “complete list” test
B) The “reasonable person” test
C) The “is/is not” test
D) The “absolute certainty” test
C) The “is/is not” test
Explanation: In McPhail v Doulton (1971), the is/is not test was established for discretionary trusts. The trustee must determine whether the individual falls within the defined class.
A settlor creates a discretionary trust for “all residents of London”. What is the most likely legal outcome?
A) The trust is valid because large beneficiary groups are allowed
B) The trust is invalid because the class is “hopelessly wide”
C) The trust is valid because it can be narrowed down over time
D) The trust is invalid because it lacks conceptual certainty
B) The trust is invalid because the class is “hopelessly wide”
Explanation: In McPhail v Doulton (1971), Lord Wilberforce stated that a trust fails if the class is so large that it is administratively unworkable.
A discretionary trust is created for “relatives of the settlor”. The trustees are unsure whether distant cousins qualify. What did the court rule in Re Baden (No 2) [1973]?
A) “Relatives” is conceptually uncertain, so the trust fails
B) “Relatives” means “descendants of a common ancestor”
C) “Relatives” means “immediate family members only”
D) “Relatives” can be defined differently by each trustee
D) “Relatives” can be defined differently by each trustee
Explanation: In Re Baden (No 2), the court ruled that trustees could interpret “relatives” differently, allowing for different but still valid definitions.
A power of appointment is created for “anyone the trustee deems worthy.” A claimant challenges this as uncertain. What is the most likely legal ruling?
A) The power is valid because trustees have discretion
B) The power fails because the term “worthy” is too vague
C) The power is valid only if the trustee provides criteria
D) The power fails because the “complete list” test applies
B) The power fails because the term “worthy” is too vague
Explanation: A power of appointment must satisfy the is/is not test. If a class is conceptually uncertain, the power fails.
A discretionary trust is set up for “past, present, and future employees” of a company, but the company did not keep employee records. What is the likely legal consequence?
A) The trust is automatically void for uncertainty
B) The trust fails because of lack of evidential certainty
C) The trust remains valid, but individuals must prove they are employees
D) The trustee can randomly select employees to benefit
C) The trust remains valid, but individuals must prove they are employees
Explanation: In Re Baden (No 2) [1973], Sachs LJ ruled that claimants must prove they belong to the class rather than the trust failing due to lack of evidence.
