Creation of trusts MCQs Flashcards
A woman is the trustee of two trusts, Trust A and Trust B. The beneficiaries of Trust A are all capable adults with vested interests. Trust B has adult and child beneficiaries.
Which statement best describes the beneficiaries’ rights?
The beneficiaries of Trust A and Trust B can terminate their respective trusts.
The beneficiaries of Trust A and Trust B cannot terminate their respective trusts.
The beneficiaries of Trust A can terminate their trust. The beneficiaries of Trust B can terminate their trust but only if the trustee agrees
The beneficiaries of Trust B can terminate their trust. The beneficiaries of Trust A cannot terminate their trust.
The beneficiaries of Trust A can terminate their trust. The beneficiaries of Trust B cannot terminate their trust.
The beneficiaries of Trust A can terminate their trust. The beneficiaries of Trust B cannot terminate their trust.
Beneficiaries can agree to terminate a trust if they are all capable adults who exhaust all possible claims to the trust property. The beneficiaries of Trust A satisfy these conditions but the beneficiaries of Trust B do not.
A woman recently died. Her valid will contains the following clauses:
‘1. I give £10,000 to my trustees to distribute in equal shares amongst my biological children.
I give £10,000 to my trustees to distribute in equal shares amongst persons who have a moral claim on me.’
Which statement best describes the status of the trusts in clauses 1 and 2?
The trustees can determine whether the trusts are valid or void.
The trusts in clauses 1 and 2 are valid.
The trust in clause 1 is void but the trust in clause 2 is valid.
The trust in clause 1 is valid but the trust in clause 2 is void.
The trusts in clauses 1 and 2 are void.
The trust in clause 1 is valid but the trust in clause 2 is void.
Where a trust involves equal distribution among the members of a class, it must be possible to compile a complete list of the members of the class. Since the class in clause 2 – ‘persons who have a moral claim’ on the deceased – is conceptually uncertain, it is not possible to identify the members of the class. As a result, the trust in clause 2 is void for uncertainty of objects.
A woman recently died. By her valid will she gave £500,000 to trustees to hold on trust for her husband for life with remainder to such of their children and in such shares as her husband may select during his lifetime or by his will and, in default of selection, to such of their children who are living on the date of her husband’s death.
Which statement best describes the husband’s position?
His rights will be determined by the trustees.
He is entitled to the trust income during his lifetime and has a power in relation to the trust capital.
He is entitled to the trust income during his lifetime.
He has a duty to appoint the trust capital.
He has a power in relation to the trust capital.
He is entitled to the trust income during his lifetime and has a power in relation to the trust capital.
The trustees hold the property on trust for the widower ‘for life’. This means that he is entitled to the trust income during his lifetime. Further, the husband ‘may’ select how the capital should be appointed to the children. This is permissive rather than imperative: it is a power
A settlement contains a discretionary trust and a fiduciary power. The objects of the discretionary trust are ‘all children living in the United Kingdom.’ The objects of the fiduciary power are ‘all adults living in the United Kingdom.’
Which statement best describes the status of the trust and the power?
The trustees can determine whether the trust and the power are valid.
The power is valid but the trust is void.
The trust and the power are void.
The trust is valid but the power is void.
The trust and the power are valid.
The power is valid but the trust is void.
The discretionary trust has millions of objects: it is administratively unworkable and void. By contrast, the number of objects of a fiduciary power does not affect the validity of the power.
By the terms of a trust the trustee is instructed to pay the trust income to a man during his lifetime and, after the man’s death, to transfer the trust capital to a woman if she reaches the age of 25. The man is alive. The woman is aged 21.
Which statement best describes the nature of the man’s and the woman’s rights?
The man and the woman have interests in possession.
The man and the woman together have the right to terminate the trust.
The man and the woman have interests in remainder.
The man and the woman have contingent interests.
The man has an interest in possession and the woman has a contingent interest in remainder.
The man has an interest in possession and the woman has a contingent interest in remainder.
A woman’s valid will contains the following clause:
‘I give £10,000 to my trustees to hold on trust for such of my children, and in such proportions, as my wife may direct while my children are under the age of 18. Any money that remains once all of the children are over 18 shall be divided equally between my children.’
Which of the following statements best describes the respective powers and obligations of the wife and the trustees?
The wife holds the property on a discretionary trust. The trustees hold the property on a fixed trust.
The wife has a power of appointment. The trustees hold the property on a discretionary trust.
The wife has a power of appointment. The trustees hold the property on a fixed trust.
The wife and trustees both have a power of appointment.
The wife and trustees both hold the property on a discretionary trust.
The wife has a power of appointment. The trustees hold the property on a fixed trust.
The wife is not a trustee but does have a power of appointment, meaning she can tell the trustees what to do with the funds while all the children are under 18. There is then a gift-over to the children once they reach the age of 18. The trustees have no discretion here at all. They must simply hold the property as directed.
A testator’s will contains the following clause:
‘I give my estate to my partner for life, remainder to my daughter on the condition that she survives my partner.’
Which of the following correctly describes the interests of the testator’s partner and daughter?
The partner has a vested right to the capital during their lifetime. The daughter has a contingent right to the capital once the partner dies.
The partner has a vested right to the income during their lifetime. The daughter has a vested right to the income once the partner dies.
The partner has a vested right to the income during their lifetime. The daughter has a contingent right to the capital once the partner dies.
The partner has a vested right to the income during their lifetime. The daughter has a contingent right to the income once the partner dies.
The partner has a vested right to the income during their lifetime. The daughter has a vested right to the capital once the partner dies.
The partner has a vested right to the income during their lifetime. The daughter has a contingent right to the capital once the partner dies.
The partner is the life tenant. They are entitled to the income during their lifetime. The daughter has a remainder interest which is contingent upon surviving the partner.
A testator wants to include a trust of land in their will. They want the land to be held on trust for their children.
What must the settlor do in order for this trust to be enforceable?
Transfer legal title of the land to the intended trustees and ensure the will is validly executed.
Declare the trust in signed writing. There is no need to transfer legal title of the land to the intended trustees as this is a testamentary trust.
Ensure the will is validly executed. There is no need to transfer legal title of the land to the intended trustees as this is a testamentary trust.
Transfer legal title of the land to the intended trustees and ensure the declaration of trust has been evidenced in signed writing.
Declare the trust in signed writing and then transfer legal title of the land to the intended trustees.
Ensure the will is validly executed. There is no need to transfer legal title of the land to the intended trustees as this is a testamentary trust.
A testamentary trust is valid if the testator’s will is valid. As long as the will is validly executed, the requirements of s53(1)(b) LPA 1925 will be satisfied. The trust will not take effect until the testator has died and so there is no need to transfer legal title in their lifetime. The trustee’s personal representatives must ensure that the legal title is transferred to the intended trustees (if they are not the trustees themselves).
A father declares a trust for his three-year old son over the money in the father’s bank account.
Which of the following is the most accurate statement in relation to this trust?
The trust is valid. It would be a good idea to evidence it in writing but this is not legally necessary.
The trust is unenforceable as the father has not complied with the necessary formalities for creating a new trust. The father should evidence it in writing.
The trust is unenforceable as the father has not complied with the necessary formalities for creating a new trust. There is a resulting trust for the father.
The trust is void as the father has not complied with the necessary formalities for creating a new trust. There is a resulting trust for the father.
The trust is void as the father has not complied with the necessary formalities for creating a new trust. The father remains the full legal owner.
The trust is valid. It would be a good idea to evidence it in writing but this is not legally necessary.
The father does not need to use writing, as this is not a new trust of land. The trust is valid and enforceable as it is. However, it would be a good idea to have some evidence of this trust.
A father wants to hold his house on trust for his daughter. The father creates a document recording the terms and details of the trust but does not sign it.
Which of the following is correct?
The trust is valid and the daughter can enforce it.
The trust is void and there is a resulting trust for the father.
The trust is unenforceable and there is a resulting trust for the father
The trust is void and the father remains the full legal owner.
The trust will only become enforceable if the father signs the document.
The trust will only become enforceable if the father signs the document.
As this is a trust of land, the formalities in s53(1)(b) LPA 1925 are applicable. The trust will only become enforceable once it has been evidenced in signed writing.
Shortly before undergoing a major operation, a woman hands a gold ring to her girlfriend saying “if I don’t make it, this is yours”. The woman dies during the operation.
Advise the woman’s girlfriend
The woman has not made a valid donatio mortis causa. The gift remains part of her estate.
The woman has not made a valid donatio mortis causa. The girlfriend holds the ring on resulting trust for the woman’s estate.
The woman has made a valid donatio mortis causa. The girlfriend is now the full legal owner of the ring.
The woman has made a valid donatio mortis causa. Her personal representatives hold the ring on trust for the girlfriend.
The woman has made a valid lifetime gift. The girlfriend is now the full legal owner of the ring.
The woman has made a valid donatio mortis causa. The girlfriend is now the full legal owner of the ring.
The gift was made in contemplation of death and clearly conditional upon death. The woman physically handed the ring to her girlfriend, clearly passing dominion. As the woman has now died, the condition has been satisfied and the gift takes effect.
A woman sends a signed letter to her son, asking him if he will hold her holiday home on trust for her grandchildren. She then properly executes a deed to transfer the legal title of the holiday home to her son and sends it to her solicitor to complete the registration at the Land Registry. The solicitor put the deed in his drawer and forgot to register it. The woman died one month after handing the deed to her solicitor.
Which of the following statements provides the best advice regarding the holiday home?
The formalities for declaring a trust of land have been satisfied. Although the trust has not been constituted, equity will perfect the trust because the woman had done everything in her power to transfer legal title to her son.
The formalities for declaring a trust of land have not been satisfied, nor has the trust been constituted. The holiday home remains part of the woman’s estate on her death.
The formalities for declaring a trust of land have been satisfied so the trust has been constituted. Legal title has therefore passed to the son who holds it on trust for the grandchildren.
The formalities for declaring a trust of land have been satisfied and the trust has been constituted. Legal title has therefore passed to the son who holds it on trust for the grandchildren.
The formalities for declaring a trust of land have been satisfied but the trust has not been constituted. The holiday home remains part of the woman’s estate on her death.
The formalities for declaring a trust of land have been satisfied but the trust has not been constituted. The holiday home remains part of the woman’s estate on her death.
The signed note satisfies s53(1)(b) LPA 1925 but legal title has not been transferred to the son. The rule in Milroy v Lord provides that equity will not perfect the imperfect transfer. There are no relevant exceptions here as the solicitor is the woman’s agent, meaning she has not put the matter beyond her own control.
Under the terms of his will a company director’s estate is to be held on trust to pay the income to his daughter for her life and after her death to be divided between all the present and former employees of his company.
The daughter consults a solicitor to ask whether the gift is valid. The daughter objects to the terms of her father’s will and is also concerned that it is not workable. Although the daughter has a complete list of past and present employees of the company she is not sure that all of them can be traced.
Which of the following statements provides the best advice regarding the gift?
A. The gift is not valid because the class of beneficiaries is administratively unworkable.
B. The gift is not valid because a company cannot be a beneficiary.
C. The gift is valid because the company still exists.
D. The gift is valid because there are a large number of employees of the company who can benefit from it.
E. The gift is valid because there is a complete record of past and present employees of the company.
E - The gift is valid because there is a complete record of past and present employees of the company.
A will trust contains the following provision:
“My Trustees shall hold my property on trust to permit my mother to live in the property for the remainder of her life and after her death to hold the property upon trust for such of my nephew and niece as survive my mother and attain the age of 21 years in equal shares.”
The nephew is now aged 20 years and the niece is aged 22 years.
Which of the following statements best describes the beneficial interests in the trust fund?
A. The mother has a vested interest but the nephew and niece have contingent interests.
B. The mother has a contingent interest but the nephew and niece have vested interests.
C. The mother, nephew and niece all have contingent interests.
D. The mother, nephew and niece all have vested interests.
E. The mother and niece have vested interests but the nephew has a contingent interest.
A - The mother has a vested interest but the nephew and niece have contingent interests.
A woman dies leaving all her estate to a charity. The following document is found by the executors amongst the woman’s papers:
“I hereby confirm that I am holding my holiday cottage on trust for my son and daughter-in-law.”
The document is dated a year ago and is signed by the woman. The signature is not witnessed.
The woman had taken no further action in relation to the cottage of which she was the sole registered proprietor. Her son and daughter-in-law (who are both adults) knew nothing about the document. They became estranged from the woman and had not been in contact with her in the six months prior to her death.
The son and daughter-in-law are claiming the cottage is held on trust for them and does not form part of the woman’s estate.
Which of the following factors is relevant in deciding whether the cottage is held on trust for the son and daughter-in-law?
A. The son and daughter-in-law are adults.
B. The legal title to the cottage belonged to the woman when she declared the trust.
C. The woman did not transfer the legal title to the cottage before her death.
D. The son and daughter-in-law were estranged from the woman.
E. The woman did not execute a deed declaring the trust.
B - The legal title to the cottage belonged to the woman when she declared the trust.
