Equity and Trusts Flashcards
What is a chattel?
Tangible item other than land such as cars, computers, books, jewellery.
What is a chose in action?
Intangible right such as a debt, company share.
What happens if a trustee is at fault?
They are personally liable to restore the trust property using their own funds. If they cannot replace the property they will need to pay compensation instead.
Which of the following best describes the respective rights of the beneficiary of a trust and the legatee of a deceased person’s estate?
A beneficiary has a proprietary interest under the trust and personal rights against the trustee relating to the administration of the trust. A legatee has a personal right against the executor relating to the administration of the estate but no proprietary rights.
A testator wishes to leave £10,000 in their will to the first of their descendants to obtain a first class degree from the University of Cambridge.
It is possible to create this as a trust in the testator’s will but it will fail if none of the testator’s descendants satisfies the condition within 125 years of their death.
What is certainty of subject matter?
Is it possible to identify the trust property?
What is certainty of objects?
Is it possible to identify the intended beneficiaries or purpose of the trust?
What is certainty of intention?
Is a trust intended at all?
Which of the following best describes the test for certainty of intention?
An objective test: The settlor must manifest an intention which is consistent with a trust arrangement but need not know what a trust is.
By his valid will, a testator made the following dispositions:
‘1. I give £50,000 to my solicitor to be applied for the benefit of my mother.
2.I give £10,000 to my wife absolutely, confident that she will do right by our children.’
The executors of the testator’s will have paid £5,000 to the solicitor and £10,000 to the testator’s widow.
The solicitor holds the £5,000 on trust for the testator’s mother. The widow is the full legal owner of the £10,000.
Match the type of property with the rule relating to certainty of subject matter when a trust is declared from a wider mass: Identical, tangible property (such as gold bars or wine bottles)
It is not possible to declare a trust over a specified number of assets from within the wider mass without identifying the specific assets which are subject to the trust.The specific assets must be identified in some way (such as by segregation or labelling).
Match the type of property with the rule relating to certainty of subject matter when a trust is declared from a wider mass: Identical, intangible property (such as shares)
It is possible to declare a trust over a specified number of assets from within the wider mass without identifying the specific assets which are subject to the trust.
By his valid will, the testator (deceased) made the following disposition:
‘I give to my trustees my favourite car on trust for my daughter, and the sum credited to my current bank account on trust to give most of it to my daughter and the balance to my son.’
There is no available evidence of which car was the testator’s favourite.
Which one of the following statements best describes the effect of the disposition?
The testator has not created a valid trust.
By his valid will, the testator made the following disposition: ‘I give £10,000 to my trustees. £5,000 is to be distributed to my children, and £5,000 is to be distributed to British men, in such shares as my trustees shall determine.’ The executors of the testator’s will have paid £10,000 to the trustees.
Which one of the following describes the trustees’ position in relation to the £10,000?
The trustees hold £5,000 on discretionary trust for the testator’s children and £5,000 on resulting trust for the testator’s estate.
What is the effect of failure to comply with section 53(1)(b) LPA 1925?
The trust is unenforceable
Match the type of trust with the formalities requirements: Transfer of land on trust
Must be evidenced in signed writing and constituted by transferring legal title to trustee
Match the type of trust with the formalities requirements: Self-declaration of trust of personal property
No formalities
Match the type of trust with the formalities requirements: Self-declaration of trust of land
Declaration must be evidenced in signed writing
Match the type of trust with the formalities requirements: Transfer of personal property on trust
No formalities for declaration but trust must be constituted by transferring legal title to trustee
Which of the following trusts would be unenforceable?
A person orally declares that they are holding their house on trust for their sibling and then leaves their sibling a voicemail to confirm the terms of the trust
Which of the following do the constitution rules relate to?
Legal Title
True or false: If a settlor intends to make a transfer on trust but fails to transfer legal title to the trustee, equity will automatically treat them as having made a self declaration of trust.
False. If a settlor intends to make a transfer on trust but fails to transfer legal title to the trustee, equity does not automatically treat this as a self-declaration of trust. For a self-declaration of trust to be valid, the settlor must explicitly declare themselves as the trustee of the property. Simply failing to transfer legal title does not suffice
How to determine if a trust been validly constituted?
To determine if a trust has been validly constituted, several key requirements must be met:
Intention: The settlor must have a clear intention to create a trust.
Subject Matter: The trust property must be clearly identified.
Objects: The beneficiaries of the trust must be clearly identified or ascertainable.
Formalities: Any legal formalities required for the transfer of the trust property must be completed.
A trust is considered completely constituted when the settlor has done everything necessary to transfer the legal title of the trust property to the trustee1. If any of these elements are missing or incomplete, the trust is not validly constituted.
What is a self declaration trust
A self-declaration of trust occurs when the settlor, who owns the property, declares that they hold the property on trust for the benefit of another person. In this situation, the settlor does not transfer the legal title to a third party trustee but instead retains it while assuming the role of trustee.
This type of trust is often used when the settlor wants to maintain control over the property while ensuring that the benefits go to the intended beneficiaries.
A woman wanted to give her house to her adult son. She completed a transfer deed and gave this to her solicitor who said he would finalise the gift on his return from holiday in two weeks’ time. The woman died the next day and in her validly executed will the house was left to her boyfriend.
Will the son be able to claim a beneficial interest in the house?
No, the house will pass to her boyfriend. The Re Rose exception to Milroy v Lord will not apply because the woman has not put the matter beyond her own control.
What is the rule in Strong v Bird
The rule in Strong v Bird is a legal principle that allows an imperfect gift to be perfected if certain conditions are met. This rule originated from the case Strong v Bird (1874). Here are the key points:
Intention to Gift: The donor must have intended to make an inter vivos (during their lifetime) gift.
Continuing Intention: This intention must have persisted until the donor’s death.
Appointment as Executor: The intended donee must be appointed as the executor of the donor’s will.
Legal Title: The legal title to the property must vest in the donee as a result of their appointment as executor.
In essence, if these conditions are satisfied, the donee can claim the gift even if the transfer was not completed during the donor’s lifetime.
A man wishes to give a five-acre paddock to his adult granddaughter to open a riding stable. The man’s solicitor completes the transfer documentation, but the man then dies unexpectedly before the granddaughter is registered as the owner. In the man’s validly executed will, his grandson is due to inherit the land. The granddaughter and her sister are appointed executors.
Can the granddaughter claim beneficial ownership of the land?
Yes, under the rule in Strong v Bird.
A trustee holds property on trust for A for life, remainder to the first of B and C to get married and, if neither marries, to charity.
Which one of the following statements correctly identifies the nature of their respective interests?
A’s interest is vested in possession. B and C’s interests are contingent
What is the rule in The rule in Saunders v Vautier
The rule in Saunders v Vautier (1841) allows beneficiaries of a trust to terminate the trust and demand the transfer of legal title to themselves, provided certain conditions are met:
All Beneficiaries: All beneficiaries must be of adult age (sui juris) and of sound mind.
Full Beneficial Interest: The beneficiaries must collectively hold the entire beneficial interest in the trust property.
If these conditions are satisfied, the beneficiaries can require the trustee to transfer the legal estate to them, effectively ending the trust. Under the rule in Saunders v Vautier, all beneficiaries who are of adult age (sui juris) and of sound mind can agree to collapse the trust. They must collectively hold the entire beneficial interest in the trust property. If these conditions are met, they can require the trustee to transfer the legal estate to them, effectively ending the trust
do the objects of a discretionary trust have proprietary rights in the trust property.
No, the objects of a discretionary trust do not have proprietary rights in the trust property. Instead, they have a right to be considered by the trustees when the trustees exercise their discretion to distribute the trust property. The beneficiaries only acquire a proprietary interest in the trust property once the trustees have made a specific distribution to them.
What is a charitable purpose?
A charitable purpose is an aim or objective that is recognized by law as being beneficial to the public. According to the Charities Act 2011, a purpose is considered charitable if it falls within one of the following categories and is for the public benefit1:
Relief of poverty.
Advancement of education.
Advancement of religion.
Advancement of health or the saving of lives.
Advancement of citizenship or community development.
Advancement of the arts, culture, heritage, or science.
Advancement of amateur sport.
Advancement of human rights, conflict resolution, or reconciliation.
Advancement of environmental protection or improvement.
Relief of those in need by reason of youth, age, ill-health, disability, financial hardship, or other disadvantage.
Advancement of animal welfare.
Promotion of the efficiency of the armed forces, police, fire, and rescue services.
Any other purposes currently recognized as charitable or any new charitable purposes that are similar to another charitable purpose.
An employer wishes to establish a sports club for its employees.
Is it possible to create a charitable trust for this purpose?
No. The employees of the company are a private class of individuals meaning the public benefit test would not be satisfied.
What is the Cypres Doctrine?
The cy-près doctrine is a legal principle used to modify the terms of a charitable trust or gift when the original purpose becomes impossible, impracticable, or illegal to fulfill. The term “cy-près” comes from the French phrase meaning “as near as possible.” Here are the key points:
Purpose: It allows courts to amend the terms of a charitable trust to achieve a purpose as close as possible to the original intent of the donor.
Application: This doctrine is applied when the original charitable purpose cannot be carried out, ensuring that the charitable intent is not entirely frustrated12.
Examples: If a trust was established to fund a specific type of medical research that is no longer relevant or possible, the court might redirect the funds to a related area of medical research3.
How to correctly identify the perpetuity rules applicable to charitable purpose trusts?
Charitable purpose trusts are unique in that they are generally exempt from the perpetuity rules that apply to private trusts. Here are the key points to correctly identify the perpetuity rules applicable to charitable purpose trusts: Exemption from Perpetuity Period: Charitable trusts can exist in perpetuity and are not subject to the usual perpetuity period limits, such as the 125-year limit that applies to private trusts12.
Public Benefit Requirement: The trust must be established for a charitable purpose that provides a public benefit. This ensures that the trust’s activities are aligned with the recognized charitable purposes2.
Accumulation Period: While charitable trusts can exist indefinitely, there are rules regarding the accumulation of income. The Perpetuities and Accumulations Act 2009 allows for two accumulation periods: either 21 years or the life of the settlor.
What is the perpetuity rule?
The rule against perpetuities is a legal principle designed to prevent the indefinite control of property through future interests. Here are the key points:
Time Limit: The rule restricts the time period within which future interests in property must vest. Under common law, this period is typically measured as “a life or lives in being” at the time the interest is created, plus 21 years.
Purpose: The rule aims to ensure that property is not tied up for too long and remains transferable and usable by future generations2.
Modern Adjustments: In some jurisdictions, the rule has been modified or abolished. For example, the Perpetuities and Accumulations Act 2009 in the UK sets a statutory perpetuity period of 125 years.
Explain no charitable purpose trusts?
Non-charitable purpose trusts are generally not valid under English law because they lack identifiable human beneficiaries who can enforce the trust. However, there are some exceptions where non-charitable purpose trusts can be considered valid if they indirectly benefit ascertained individuals or fall within certain recognized categories. Examples of valid non-charitable purpose trusts include:
Trusts for the maintenance of specific animals: These are often upheld because they indirectly benefit the animals’ caretakers.
Trusts for the maintenance of graves and monuments: These are recognized as valid because they serve a specific, identifiable purpose.
Trusts for private masses: These can be valid if they meet certain conditions.