Creation of Trust

Question 1

What is equity?

Answer 1

A distinct system of English law developed separately from common law.

Equity aims to mitigate the rigors of common law and provides more flexible remedies.

Question 2

What are the two main purposes of equity?

Answer 2

1. To mitigate the rigors of common law
2. To provide more options for redress beyond damages

Unlike common law, equity can offer various remedies.

Question 3

What does property encompass?

Answer 3

Money, shares, land, personal possessions, etc.

Property can be held legally or equitably.

Question 4

What is a trust?

Answer 4

An arrangement where one person holds property for the benefit of another.

The trustee must follow the terms set out by the settlor.

Question 5

Who holds the legal title in a trust?

Answer 5

The trustee.

The trustee has the responsibility to manage the trust property.

Question 6

Who holds the equitable title in a trust?

Answer 6

The beneficiary.

Beneficiaries enjoy the benefits of the trust property.

Question 7

What are the responsibilities of a trustee?

Answer 7

1. Manage the property
2. Follow the terms of the trust
3. Distribute as directed
4. Make good any loss caused by breach of duty

Trustees must act in the best interests of the beneficiaries.

Question 8

True or False: Beneficiaries have a proprietary right in a trust.

Answer 8

True.

Beneficiaries can enforce their rights against the trustee.

Question 9

Fill in the blank: Trusts are often favored over ______ because they are more versatile and sophisticated.

Answer 9

gifts

Trusts provide structured management of assets compared to simple gifts.

Question 10

What happens if a trustee wrongly gives trust property to someone?

Answer 10

The beneficiary can recover the property.

Beneficiaries have rights to reclaim mismanaged trust assets.

Question 11

What are the 2 types of implied trusts?

Answer 11

Resulting and constructive

Question 12

What is an implied trust?

Answer 12

A trust declared by a party not directly but by implication

An implied trust arises in circumstances where it is necessary for an inference to be drawn from the available admissible evidence that this was what the settlor intended

Question 13

What is an express trust?

Answer 13

An express trust is created when a settlor or testator constitutes a trust with the express or inferred intention of creating a trust

Question 14

What is a resulting trust?

Answer 14

When the settlor would have likely created a valid trust if they had thought about it more

Question 15

What is a constructive trust

Answer 15

Implied in order to achieve a fair result between the parties

Question 16

What is an express trust?

Answer 16

A trust that the settlor expressly intends to create.

The settlor must make a valid declaration of trust and put assets in the trust or in the hands of the trustee.

Question 17

What must a settlor do to make an express trust enforceable?

Answer 17

Identify trustees, property, beneficiaries and put assets in the trust.

This includes making a valid declaration of trust.

Question 18

What is a fixed interest trust?

Answer 18

Trustees have no discretion as to how to distribute trust property between beneficiaries.

Example: ‘I give £2100 to my trustees to hold on trust for my sister Rachel.’

Question 19

What happens if a declaration is silent on beneficiary shares in a fixed interest trust?

Answer 19

It is presumed that beneficiaries will share equally.

This ensures fairness among beneficiaries.

Question 20

What is a discretionary trust?

Answer 20

Gives the trustee discretion as to the amounts any person may receive and/or whether they receive anything at all.

This allows for flexibility in distribution.

Question 21

What are the three certainties required for a valid declaration of trust?

Answer 21

Certainty of intention, certainty of subject matter, certainty of objects.

These certainties ensure clarity in trust arrangements.

Question 22

What does certainty of intention require?

Answer 22

The settlor must use words that impose a duty on someone to act as a trustee for the benefit of someone else.

Precatory words do not create a trust; obligatory wording must be used.

Question 23

True or False: The word ‘trust’ is necessary for certainty of intention.

Answer 23

False.

Obligatory or mandatory wording is required, not necessarily the word ‘trust.’

Question 24

What is meant by precatory words in the context of certainty of intention?

Answer 24

Words expressing a wish, hope, or expectation that do not create a trust.

Using such language results in a gift rather than a trust.

Question 25

What is certainty of subject matter?

Answer 25

The trust property must be described with certainty and must be ‘property.’

Future property that is not presently owned cannot be the subject of a trust.

Question 26

What are the two aspects of certainty of subject matter?

Answer 26

• The trust property must be described with certainty
• The thing being held must be ‘property’

This ensures that the trust has clear and identifiable assets.