Ch 3

Question 1

Successive trust

Answer 1

Property is held in trust for a succession of trusts, taking effect one after the other

Question 2

Limited Liability Parnerships (LLPs)

Answer 2

Seperate persons and are subject to similar registration and accounting requirements
Partners are not individually liable for the LLP’s debts
For tax purposes an LLP is treated like a traditional partnership for tax purposes
Partners pay income tax and NICs on their share of profits
LLP’s do not pay corporation tax

Question 3

Limited Companies (Ltd)

Answer 3

Legally separate identity from the owners

Pay corporation tax on all profits (including capital gains)

Question 4

Public Companies (PLCs)

Answer 4

Must have at least 2 directors and 2 shareholders
Must state they are a plc
Need an extra certificate from the Registrar of Companies before trading
Must have allotted shares with a value of at least £50k
Disclosure of shareholdings

Question 5

For a binding contract to exist

Answer 5

Must be an offer and acceptance
Intention to create a legally binding contract
Consideration, both parties must stand to pay something to the other. e.g. policyholder pays the premium and the life office guarantees the sum assured in the event of a valid claim

Question 6

Joint Ownership

Answer 6

When two or more people buy a house (or other assets) together
Joint Tenancy - Neither individual can sell without the others agreement. Each has an equal share of the property. If one dies, the survivor inherits the others share without probate being needed.
Tenancy in Common - Each owner holds their shares separately. They can dispose of their share at will and when they die their share is disposed of as described in their will or the laws of intestacy

Question 7

Individual Voluntary Arrangement

Answer 7

Can be used by a debtor as an alternative to bankruptcy
For IVA to be acceptable there must be a vote. Creditors representing at least 75% of the debts held need to vote in favour of the IVA
Once approved creditors cannot take legal action to recover debts
Fees are payable but they are included as part of the monthly payment agreed in the proposal

Question 8

Express Trust

Answer 8

Intentionally and expressly created, usually by some written method such as a deed or a will. Called ‘express’ because the trust is expressly set out.

Question 9

Implied Trust

Answer 9

Not created expressly but implied from the actions or circumstances of the parties.

E.g. Where a partnership purchases property and arranges for the conveyance to be one of the partners only, who will then hold the property on trust for all the partners even if there is no formal written document

Question 10

Presumptive Trust

Answer 10

One person purchases a property in the name of another. Similar to an implied trust.

E.g. Alice buys a house for Benny. There is then a presumption that Benny holds it in trust for Alice

Question 11

Successive Trust

Answer 11

Property is held in trust for a succession of interests, taking effect one after the other

Question 12

Constructive Trust

Answer 12

Imposed by law, regardless of the intentions or presumed intentions of those involved

Question 13

Resulting Trust

Answer 13

When there is a failure of the trust on which the property is held. As the purpose of the trust can no longer be fulfilled, there is said to be a resulting trust for the creator of the trust, and ownership of the property reverts to that person

Question 14

Bare or Absolute Trust

Answer 14

The trustee’s sole duty is to transfer the trust property to the appropriate beneficiary.

Question 15

Power of Appointment trusts

Answer 15

A power exists to vary or appoint beneficiaries.
This type of trust is flexible as it gives trustees power to vary the beneficiaries according to family circumstances
Can cope with birth and death in a way the fixed interest trust could not.

Question 16

Interest in Possession trusts

Answer 16

Beneficiary has a present right to income from the trust property
Might also be entitled to the capital

Question 17

Discretionary trusts

Answer 17

A power of appointment trust where there is no one with current interest in possession.

Question 18

Will trusts

Answer 18

Created by a will, as opposed to one created during the settlers lifetime.
Can be changed while the testator is alive.

Question 19

Statutory Trusts

Answer 19

Specifically created by statute or law

Question 20

Pension Scheme trusts

Answer 20

Occupational pension schemes must be set up under an irrevocable trust. Personal pension schemes can also be set up under trust
Irrevocable trust can be created in 3 ways; Trust Deed, Declaration of Trust or deed poll