Equity - Intro

Question 1

how is a trust established?

Answer 1

A trust is established by a Settlor inter vivos or by a Testator by his Will’.

Question 2

what do trustees excercise?

Answer 2

legal administrative powers over the property.

Question 3

what do beneficaries enjoy?

Answer 3

enjoy the equitable hence real economic ownership of the property/asset.

Question 4

Trusts for Human Beneficiaries and Purpose Trusts- what is the trusts for Beneficiaries?

Answer 4

Trustee has legal title to the property and Beneficiaries have equitable title to property

Question 5

Trusts for Human Beneficiaries and Purpose Trusts-

Answer 5

Trustee has legal ownership of the property. However, there is no beneficiary and no equitable ownership, e.g Charitable Trusts and limited forms of Private Purpose Trusts.

Question 6

examples of trusts for beneficiaries?

Answer 6

common trust examples:- family trust fund- discretionary trust- fixed interest trust- trust with 2 life interests

Question 7

trusts for beneficiaries- common trust e.gs-family trust fund?

Answer 7

Common Trust Examples:(a) A family Trust Fund (e.g.£100K) held by Trustees on Trust for a Beneficiary who gets income paid to him by trustees for life (life tenant-interest earned on the fund) and after his death, the capital sum is paid by the trustees to a remainderman. Trust then ends.

Question 8

trusts for beneficiaries- common trust e.gs-why is a family trust fund good?

Answer 8

Trust here useful in dividing up enjoyment of income and capital.

Question 9

trusts for beneficiaries- common trust e.gs-what is a life tenant?

Answer 9

It is a trust that is established to provide a beneficiary with the right to receive the income (after expenses) from the trust. The beneficiary is known as the life tenant

Question 10

trusts for beneficiaries- common trust e.gs-what does a life tenant not have right to and how can a life tenant be established?

Answer 10

life ten interestThe life tenant does not have any right to the capital, unless expressly given in the trust deed. If there is a property held in the trust the life tenant is entitled to either receive the rental income from it or to live in the property if they wish.A life interest trust can be established either in your lifetime or by your Will.

Question 11

trusts for beneficiaries- common trust e.gs-what does a life ten and remainder man both had?

Answer 11

Both life tenant and remainderman have equitable property interests, interest vested in possession and in interest respectively.Life tenant and remainder man – EQUITABLE PROPERTY INTERESTS

Question 12

trusts for beneficiaries- common trust e.gs-what is a discretionary trust e.g?

Answer 12

(b) A fund of £1 million held by trustees on a Discretionary Trust. Here trustees must pay the money, entirely as they may choose, to individuals from a class of beneficiaries, e.g ‘the nephews and nieces of the Settlor’.

Question 13

trusts for beneficiaries- common trust e.gs-what is a discretionary trust?

Answer 13

the beneficiaries do not have a fixed entitlement or interest in thetrustfunds. The trustee has the discretion to determine which of the beneficiaries are to receive the capital and income of thetrustand how much each beneficiary is to receive.

Question 14

trusts for beneficiaries- common trust e.gs-e.g of fixed interest trust?

Answer 14

(c) £1 million held by trustees on a Fixed interest trust for a class of persons in equal shares, e.g on trust for the Settlor’s nephews and nieces in equal shares.

Question 15

trusts for beneficiaries- common trust e.gs-what isa fixed interest trust?

Answer 15

He or she cannot change the beneficiaries or the benefits they are set to receive. The most common type offixed interest trustis a lifeinterest trust, under the terms of which one individual will have a right to all of thetrust’sincome during his or her lifetime.

Question 16

trusts for beneficiaries- common trust e.gs-e.g of trust with 2 life interests?

Answer 16

(d) £ 1 million held by trustees on trust for A for life remainder to B for life remainder to C at 30. (Trust with two life interests and a contingent remainder interest, all in equity).

Question 17

History- how was a trust developed?

Answer 17

Trust developed by Court of Chancery from the earlier ‘Use’ device in Tudor times and onwards.

Question 18

History- what did the courts recognise?

Answer 18

Trusts recognised by the Court of Chancery in its Equitable jurisdiction – the notion that there could be separate legal/paper owners of property and other real owners in equity.

Question 19

HISTORY- what are legal paper owners and what are real owners?

Answer 19

Legal paper owners – propertyReal owners – in equity

Question 20

TYPES OF TRUSTS-what are express trusts?

Answer 20

An express trust can arise in various ways,e.g:

Question 21

TYPES OF TRUSTS-how can expres trusts arise?

Answer 21

(i) Where S the owner of Blackacre declares himself trustee of the property for B (‘self-declaration of trusteeship’);(ii) Where S, owner of Blackacre conveys it to Z ‘on trust’ for B;(iii) Where T leaves Blackacre in his Will to Z with directions to hold it on trust for B.

Question 22

TYPES OF TRUSTS-what is a resulting trust?

Answer 22

B- when ben interest returns to settlor/testator

Question 23

TYPES OF TRUSTS-when does a resulting trust arise?

Answer 23

A Resulting Trust arises when the beneficial interest returns to the Settlor/Testator.

Question 24

TYPES OF TRUSTS-what are the types of resulting trusts?

Answer 24

-r.t -automatic resulting trust

Question 25

TYPES OF TRUSTS-what is a automatic resulting trust?

Answer 25

If there is a ‘gap’ in the beneficial ownership, (‘equity abhors a vacuum’) and the equitable interest results back to the Settlor/Testator:

Question 26

TYPES OF TRUSTS-cases for automatic resulting trusts?

Answer 26

Vandervell v IRC [1967], or where a trust fails, Re Diplock [1941] or where there is a surplus of funds after a purpose trust has been achieved, Re Gillingham Bus Disaster Fund [1958].

Question 27

TYPES OF TRUSTS-what is a presumed resulting trusts?

Answer 27

Where property is purchased in the name of another, there is a presumption that the then legal owner holds that property on trust for the man who advanced the purchase money. Equity respects ‘the solid tug/input of money’,

Question 28

TYPES OF TRUSTS-cases for presumed trusts?

Answer 28

Dyer v Dyer (1789), Re Vinagradoff [1935].

Question 29

TYPES OF TRUSTS- what is a constructive trust?

Answer 29

A Constructive trust of property can be imposed by a court wherever ‘justice and good conscience require it, e.g where:A fiduciary (e.g solicitor holding client money) misappropriates funds entrusted to him and makes unauthorised profits.A party knowingly receives trust property or is an accessory who dishonestly facilitates a trustee’s breach of trust.

Question 30

TYPES OF TRUSTS-e.g of constructive trust?

Answer 30

A fiduciary (e.g solicitor holding client money) misappropriates funds entrusted to him and makes unauthorised profits.

Question 31

TYPES OF TRUSTS-when can constructive trusts be imposed?

Answer 31

Constructive Trusts can also be imposed in relation to family home co-ownership disputes, Lloyd Bank v Rossett [1991].Constructive Trusts can also be imposed to stop a killer profiting by money or property from his crime, e.g H kills W to gain life insurance payout Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147.Constructive Trusts can be imposed so as to impose compensatory liability on a ‘third party’ who receives trust property in breach of trust or who is an accessory who dishonestly facilitates the trustees breach.Constructive Trusts can be imposed to prevent a statutory rule being used to perpetrate fraudulent or unconscionable conduct, Rochefoucauld v Boustead [1897] 1 Ch 196.

Question 32

TYPES OF TRUSTS-cases for construcctive trusts?

Answer 32

-Lloyd Bank v Rossett [1991]-Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147.

Question 33

TYPES OF TRUSTS-e.g of stat trusts?

Answer 33

(d) Statutory TrustsStatue can supply and impose trusts in certain situations, viz:(a) S.33 Administration of Estates Act (AEA)1925/TOLATA 1996 – where a person dies intestate, his personal representatives hold his real and personal property on trust with a power to sell it.(b) Co-Owned land is held on Trust by virtue of Ss.34 and 36 LPA, only first four named adults in the conveyance/transfer are the legal joint tenants.

Question 34

TYPES OF TRUSTS-what are fixed trusts?

Answer 34

Settlor/Testator may create a fixed trust, which specifies precisely the equitable shares of the beneficiaries. E.g £100k to my trustees on trust for my nephews and nieces in equal shares.

Question 35

TYPES OF TRUSTS-what are discretionary trusts?

Answer 35

(ii) Discretionary TrustsSettlor/Testator leaves it to the trustees to determine the manner in which trust capital and/or income should be distributed. Essentially Settlor/testator delegates completely the decision as to who gets what, if any, how much and when. E.g £100k to my trustees on trust to my nephews and nieces in such shares as my trustees shall in their absolute discretion see fit.

Question 36

Trusts and Powers of Appointment - a trust?

Answer 36

A Trust is obligatory or mandatory in nature. The trustee(s) must execute and carry out the trust in favour of the Beneficiaries.

Question 37

what isPowers of Appointment ?

Answer 37

A Power of Appointment is completely discretionary. It does not have to be exercised. It is an authority by the Settlor/Testator under which the Donee of the Power can give away i.e appoint specific property (e.g money) to such objects or appointees as the donee (holder of the power) sees fit.

Question 38

how to differntiate btw a power and trust?

Answer 38

It can be difficult sometimes to work out whether an instrument e.g settlement/will has created a Power of Appointment or a Trust.E.g £100k to Harold for distribution to my nephews and nieces as my trustees might determine.It can be argued either way…

Question 39

what are the types of Powers of Appointment? and cases?

Answer 39

Bare Powers – Given to someone who is not a fiduciary (such as a trustee), need not be exercised and there is no duty to consider exercise on donee.Fiduciary Powers – Given to someone in the capacity of a fiduciary e.g a Trustee. Such a donee must by virtue of his office, from time to time actively consider exercising the power and survey the objects of the power Re Hays Settlement Trusts [1982] 1 WLR 202.General Power – Donee can appoint to anyone in the world including himself.Special Power – Donee can appoint only amongst a specified class of people, e.g in favour of Testator’s children now living or employees of a certain company.Hybrid Power/Intermediate Power – Where donee can appoint to anyone except certain persons as specified, e.g himself Re and/or the settlor/testators’s children, see, Re Manisty’s Settlement [1974]; Re Hay’s Settlement (above); Re Beatty’s WT [1990].

Question 40

what happens with an object of a power of appointment?

Answer 40

An object of a power owns nothing until if and when the power is exercised in their favour.

Question 41

what happened in mcphail?

Answer 41

McPhail v Doulton/Re Baden No.2 [1971]See judgment of Lord Wilberforce, and the issue of distinguishing between Discretionary Trusts and Powers of Appointment.Note: When Lord Wilberforce talks of ‘Trust Powers’ he actually means Discretionary Trusts !

Question 42

what happened with a Trust Couple with a Power of Selection?

Answer 42

Burrough v Philcox (1840) 5 Myl & Cr 72 T provided that the survivor of his children should have power by his will: ‘To dispose of all my real and personal estates amongst my nephews and nieces, or their children, either all to one of them or to as many of them as my surviving child shall think proper’No appointments were made and the court held the members of the class were INTENDED to take equally as a trust had been created.

Question 43

burrough v philcox contrast case?

Answer 43

Re Weekes -T gave her husband a life interest and a power ‘to dispose of all such property, by will, amongst our children’ .He died intestate. Held No trust in favour of the class. Children took nothing. No gift over in default of appointment. Resulting Trust of property back to T (residuary legatees).

Question 44

Spheres of Application of the Trust?

Answer 44

Affairs of persons of unsound mind/infants/bankrupts are often placed in the hands of trustees.Trusts are used to preserve family wealth down through the years to benefit future generations.Trusts are the device through which the co-ownership of both land and personal property is organised.Pension Funds are often managed by trustees. - Unincorporated Associations such as Clubs and Societies hold assets and property through the medium of the Trust device for and on behalf of their members. - Trusts are used for devising tax saving schemes.The trust device is a ‘vehicle’ through which money can be given to trustees to apply it for the attainment of a certain purpose, (E.g Charitable Purpose Trusts, Trust of Imperfect Obligation and Private Purpose Trusts (Re Denley [1969] 1 Ch 373).