Certainty of Subject Matter Flashcards
What is required for certainty of subject matter in a trust?
A) The trust property must be clearly identifiable
B) The trustee must confirm their role
C) The settlor must describe the trust as a “legal trust”
D) The beneficiaries must all agree on the trust property
A) The trust property must be clearly identifiable
Explanation: A trust must have clearly defined property. If the subject matter is uncertain, the trust fails.
A trust will fail for uncertainty of subject matter if:
A) The property subject to the trust is not identifiable
B) The trustee is unwilling to manage the trust
C) The trust property has multiple beneficiaries
D) The trust is not witnessed
A) The property subject to the trust is not identifiable
Explanation: If the trust property is not clearly defined, the trust fails. Certainty of subject matter requires specific and identifiable property.
Which of the following statements about certainty of subject matter is FALSE?
A) A trust over shares in a company is valid even if specific shares are not identified
B) If a trust property is not identified, the trust will fail
C) A trust can be created over an unspecified portion of an estate
D) The trustee cannot choose which property is subject to the trust if it is not specified
C) A trust can be created over an unspecified portion of an estate
Explanation: A trust must specify which part of the estate is held on trust. In Palmer v Simmonds (1854), a trust over the “bulk” of an estate was invalid due to vague wording.
Which of the following is NOT an example of intangible property?
A) Intellectual property rights
B) Shares in a company
C) Debts
D) A house
D) A house
Explanation: A house is a tangible asset. Intangible property includes shares, intellectual property, and debts, which do not exist in physical form.
A settlor declares a trust over 20 bottles of wine from a stock of 100 identical bottles. The bottles are not separated or earmarked. What is the likely outcome?
A) The trust is invalid because the specific bottles are not identified
B) The trustee can later select 20 bottles for the beneficiary
C) The court will apply a discretionary approach to allocate the bottles
D) The trust is valid because all bottles are identical
B) The trustee can later select 20 bottles for the beneficiary
Explanation: Courts sometimes allow trustees to allocate property if all items are identical and if it was clear that a trust was intended.
A trust is created stating, “I leave the bulk of my estate to my son.” What is the likely legal outcome?
A) The trust is invalid because “bulk” is too vague
B) The trustee will determine what “bulk” means
C) The court will divide the estate equally between beneficiaries
D) The trust is valid because the son is named
D) The trust is valid because the son is named
Explanation: Normally, a trust fails for uncertainty of subject matter. However, courts may infer intention if the beneficiary is clearly named and the settlor’s intent can be determined.
A trust states, “My two cars are held on trust for A and B, with C deciding who gets which car.” Before C makes a decision, they pass away. What happens?
A) The trust fails because beneficial entitlement is uncertain
B) The trustee can allocate the cars instead of C
C) The court will divide the cars equally between A and B
D) The trust is valid, and A and B can choose their cars
C) The court will divide the cars equally between A and B
Explanation: In Boyce v Boyce (1849), a trust failed when a beneficiary’s selection could not be made. Courts may resolve such issues by equally dividing assets if possible.
A settlor declares a trust over one of their five one-carat diamonds but does not specify which one. What is the legal outcome?
A) The trustee can later allocate the diamond
B) The trust fails because specific diamonds must be identified
C) The beneficiary automatically gets the most valuable diamond
D) The trust is valid because all diamonds are identical
D) The trust is valid because all diamonds are identical
Explanation: Diamonds are non-fungible, meaning each one is unique. However, if the diamonds are identical, courts may allow the trust.
A trust states that trustees must pay a “reasonable income” to a beneficiary. The beneficiary argues that the trust is void due to uncertainty. What will the court decide?
A) The trust is valid because “reasonable income” has an objective meaning
B) The trust is void because “reasonable” is too vague
C) The trustee must set a fixed sum for payments
D) The court will require the settlor to clarify the terms
D) The court will require the settlor to clarify the terms
Explanation: In Re Golay’s Will Trusts (1965), courts interpreted “reasonable income” objectively, but clarification from the settlor is preferable.
A company sells gold bars and declares that 20 out of 100 bars are held on trust for investors, but the bars are not individually marked. What is the likely outcome?
A) The trust fails because the specific bars are not identified
B) The trust is valid because gold is a fungible commodity
C) The trustee can later choose the bars to allocate to investors
D) The investors automatically gain co-ownership of all 100 bars
D) The investors automatically gain co-ownership of all 100 bars
Explanation: In Re Lehman Brothers (2009), courts recognized co-ownership as an alternative where specific property was not allocated.
