General

Question 1

In what circumstances can a Trustee retire?

Answer 1

A trustee may retire without replacement only if he leaves in office two trustees or a trust corporation, and his co-trustees consent by deed.

A trustee may be replaced where he desires to be discharged provided that a replacement trustee is appointed and the appointment is made in writing. The appointment must be made by the retiring and continuing trustees.

Question 2

In what circumstances may a Trustee purchase beneficiary’s interest?

Answer 2

The ‘fair dealing rule’ applies to the purchase by a trustee of a beneficiary’s interest. A trustee may purchase the interest of a beneficiary provided that the price is fair and full disclosure of all material facts is made.

Question 3

Where can trustees purchase land by way of investment?

Answer 3

Under the Trustee Act 2000, trustees are limited to purchasing land in the United Kingdom.

Question 4

Which B’s must consent to advancement of capital?

Answer 4

Where a beneficiary has an interest in the capital of a fund, the trustees have power to advance capital for the beneficiary’s advancement or benefit. The trustees must obtain the consent of any beneficiary with a prior interest in the income of the fund.

Question 5

In what circumstances is a third party liable for a trustee’s breach?

Answer 5

Where a third party acts as an accessory to a breach of trust, he becomes personally liable as if he were a constructive trustee.

To establish accessory liability, it must be shown that the third party accessory was dishonest-that is, he did not act as an honest person would in the circumstances.

It is not necessary to show that the third party knew that a breach of trust was committed.

Question 6

What kind of land are trustees authorised to purchase?

Answer 6

• Trustees must invest in authorised investments.
• They have power to purchase land in the UK as an investment, as a residence for a beneficiary, or for any other reason, but they have no power to buy land outside the UK.

Question 7

With an adult beneficiary, when should Ts pay the income of the trust?

Answer 7

The trustees must pay the income to an adult beneficiary with contingent interest in the entire estate. Where a beneficiary over the age of 18 has an interest in the income of a trust fund, the trustees must pay the income to the beneficiary until the beneficiary’s interest vests or fails.

Question 8

What is the chain of reprsentation?

Answer 8

When the sole executor of an estate dies and that executor’s executor takes a grant of probate for the deceased executor’s estate, the executor automatically becomes the executor of the original estate. This is known as a chain of representation.

Question 9

What happens when a beneficiary dies before the settlor?

Answer 9

The gift to the beneficiary lapses UNLESS the beneficiary is the settlor’s issue. In that case the gift will pass to beneficiary’s issue (if any).

Question 10

In what circumstances can a trustee retire without arranging a replacement?

Answer 10

The trustee can retire without being replaced if: (1) the trustee obtains the consent by deed of all the co-trustees and the person (if any) given power to appoint new trustees by the trust instrument, and (2) the trustee leaves in office at least two trustees or a trust corporation.

Question 11

What happens to e trust that fails for certainty of intention?

Answer 11

Usually is a gift to to intended trustee.

Question 12

What is the complete list test and when it is used?

Answer 12

Used for a fixed trust where, eg, T has obligation to split the fund equally between the settlor’s children.

T must be able to draw up a complete list of all the beneficiaries.

Conceptual and evidential certainty

Question 13

What is the given postulant test and when it is applicable?

Answer 13

To determine the validity of a discretionary trust.

Not necessary for the whole range of potential beneficiaries to be identified, as long as court can clearly determine whether any given individual falls within or outside the class of potential beneficiaries.

Conceptual certainty, evidential uncertainty.

Question 14

In what circumstances will a discretionary trust fail for administrative unworkability?

Answer 14

Where notwithstanding sufficient conceptual certainty under the given postulant test, the objects are too wide to form a class.

eg. trust for “all or some of the inhabitants of West Yorkshire”

Question 15

When creating a trust by transferring property to the trustee, what 2 things must a settlor do?

Answer 15

1. Make a declaration of trust - word or conduct that they intend T to be legally bound. *NB for land this must be in writing!
2. Transfer the property to the trustee. *NB every effort test.

Question 16

What is the every effort test?

Answer 16

Court will perfect imperfect gift IF:

S did everything required to transfer the property and has put the property outside their control.

**DOES NOT APPLY if property still within S’ control.

Question 17

What is the Donatio Mortis Causa rule?

Answer 17

A gift may be enforced if:

1. the donor delivers the property to a donee while in complation of imminent impending death
2. with the intention that the property be given to the donee IF the donor dies and be returned if donor survives, AND
3. donor dies

Question 18

What is the rule in Strong v Bird?

Answer 18

If S dies before transfer made, AND donee OR trustee becomes PR, the transfer is complete in law and the gift is enforceable.

*Donor must have continuous unbroken intention to give the gift between intitial intention to give the gift and donee’s appointment as PR.

Question 19

What is the method for transfering legal title of land to trustee?

Answer 19

1. Deed,
2. written declaration of trust, AND
3. registration HMLR.

NB - Registration can be done by trustee, effective transfer if 1 and 2 are met and the deed is handed over to the Trustee

Question 20

What is the method of transfer of bank account to trustee?

Answer 20

Written notice to the bank

Question 21

What is a secret trust and how is it enforceable?

Answer 21

Looks like an outright gift to a nominated person.

The intended benficiary may enforce it is they can prove the terms of the trust.

Enforceable even if the communication describing the trust was not made until after the will was executed.

**FAILS if legatee expressly refuses to accept the trust OR did not know about the trust. Legatee will take the gift free from any trust.

Question 22

What is a half-secret trust and how is it enforceable?

Answer 22

A half secret trust mentions that a trust exists but keeps the identity of B secret.

Enforceable by B as long as communication to T took place before or at the time of the will.

Question 23

What is a person with a life interest in a trust entitled to?

Answer 23

They have limited interest - they are entitled to the income of the trust, NOT the capital.

Question 24

What conditions must be me for the rule of Saunders v Vautier to apply?

Answer 24

1. Benficiaries adult + capacity
2. Beneficiaries agree
3. Together beneficiaries have absolute interest.

Question 25

In what circumstances will transfer from one inidividual to another for no consideration amount to a resulting trust?

Answer 25

When there is no evidence for the reason for the transfer

UNLESS presumption of advancement applies

Question 26

What is the presumption of advancement and when does it apply?

Answer 26

Presumption of resulting trust following voluntary transfer does not apply IF:

Settlor is:

1. B’s husband or fiance
2. B’s father
3. Stands in as loco parantis to B

Question 27

The presumptions of resulting trust and advancement can be rebutted by acts or statements of a person in what circumstances?

Answer 27

When the are made before or at the time of the transaction

Question 28

What are the requirements for proprietary estoppel in the finding of a constructive trust?

Answer 28

1. Representation made or assurance given (clear rep or passive encouragement)
2. Reliance on the representation
3. suffered detriment as a result of reliance.

Question 29

What may the Court consider to determine inferrence of common intention?

Answer 29

• contribution to purchase price
• mortgage payments
• payment of household expenses
• substantial renovations

Question 30

What is the cy-pres doctrine and when does it apply?

Answer 30

Permits court to direct that the trust be applied to another charitable purpose in the even that the initial gift fails.

TWO ways in which this works:

1. Initial failure of gift - Court must find a general charitable intention
   
   1. Subsequent failure of gift - Court need not find general charitable intention

Question 30

What is a Denley trust and when does it apply?

Answer 30

A trust which appears to be for a private purpose - may be valid as it is enforceable.

eg. employees of a company. Ascertainable beneficiaries.

Question 31

What is an honorary trust?

Answer 31

NOT enforceable but can nevertheless be valid IF no longer than 21 years.

eg. maintenance of a pet, graves, tomb, etc.

IF T refuses/fails then resulting trust.

Question 32

Who can appoint a new trustee?

Answer 32

1. person named in the trust
2. remaining trustees
3. PR of the last surviving trustee
4. court

CANNOT appoint beyond 4

Question 33

In what circumstances can a trustee retire without being replaced?

Answer 33

A trustee may retire without being replaced provided there are at least two trustees or a trust corporation remaining.

Question 34

What is the duty to take possession of trust property?

Answer 34

All trustees must ensure that trust property is in their joint possession and control.

Question 35

What is the statutory standard of care for trustees?

Answer 35

Such care and skill as is reasonable in the circumstances, taking into account any special knowledge.

Question 36

What is the general standard of care applicable to trustees?

Answer 36

Duty to act with the prudence of ordinary man of business

This applies eg in case of powers of maintenance and advancement.

Question 37

What are the three exceptions to the duty to act personally?

Answer 37

1. can delegate purely administrative functions to an agent - eg tax returns
2. can delegate investment decisions provided the statutory conditions are met
3. can delegate ALL functions by power of attorney for 12 months MAX.

Question 38

What is the standard investment criteria trustees must have regard to?

Answer 38

1. Suitability - of the type of investment
2. Diversification - so far as appropriate.

Question 39

How can trustees avoid liability for performance of investments?

Answer 39

If the trustees act with reasonable care, take the appropriate advice, and review the investments regularly, they will not be liable for losses arising from the investments

Question 40

What the power of maintenance and when does it apply?

Answer 40

It is a discretionary power to use trust income for a minor beneficiary rather than accumulate it during minority.

**NB - IF capital interest in contingent on reach age older than 18, then B entitled to income arising after 18th bday.

**Must have right to income of the trust fund (eg a life interest) as opposed to interest in capital of the fund. B without interest in the income cannot get maintenance.

Question 41

What are the three provisos to the trustees discretionary power to advance capital to B?

Answer 41

1. Must not exceed the limit - must not reach entire vested/presumptive interest
2. Must be accounted for - if B dies before vester capital interest, no need to return to trust. BUT will reduce entitlement if B reaches relevant age
3. consent of prior B is required - consent from anyone with prior interest required.

Question 42

In what circumstances can beneficiaries request minutes of meetings of Ts?

Answer 42

Bs are entitled to see all minutes EXCEPT in relation to Ts discussions regarding the exercise of their discretion.

Question 43

Can trustees offset losses for breach of trust?

Answer 43

No - generally not permitted to offset loss from one breach by gain from another breach.

B can keep the gain AND sue for losses that arose from the other breach.

Question 44

In what circumstances could the court order one T to indemnify another T?

Answer 44

T can claim indemnity from a co-trustee where:

1. the co-T was guilty of fraud, or was the solicitor who advised the breach; OR
2. Co-T is professional trustee and T is just a lay trustee.

Question 45

What three conditions must be met for a B to use equitable tracing?

Answer 45

1. property was subject to a fiduciary relationship;
2. the property is identifiable using equitable tracing; and
3. the property is not in the hands of a bona fide purhcaser for value without notice.

**CAN use this with innocent volunteer

Question 46

In what circumstances will a third party be held liable like a trustee for receiving trust property?

Answer 46

If third party is a knowing recipient of stolen trust property.

Claimant must sow that the recipient had sufficient knowledge to make it unconscionable for the recipient to retain the property.

Question 47

What circumstances give rise to claim against a person for dishonest accessory?

Answer 47

1. Party acted to assist (usually positive act, omission not enough)
2. with conscious impropriety (dishonesty)
3. regardless of whether property was received for own benefit

IF established, party becomes constructive trustee

Question 48

In what circumstances can trustees scarry on testator’s business?

Answer 48

Personal representatives have a variety of powers to support the administration of an estate. The personal representatives generally have no authority to carry on the deceased’s sole trade, but they can do so in order to sell the business as a going concern, as in this case.

Question 49

Can trustees use the power to advance capital under discretionary trusts?

Answer 49

The statutory power to advance capital applies to trusts with fixed interests where a beneficiary has a vested or contingent interest in the capital of a fund.

The statutory power does not apply to discretionary trusts.

In a discretionary trust, the individual beneficiaries do not have interests in the capital.

However, the trustees have power to pay out capital and a duty to consider whether to exercise their power.

Question 50

What are the class closing rules?

Answer 50

EG - “£50,000 to the children of my sister who reach the age of 18”

Class closing rules apply to determine how and when a class gift should be distributed.

Generally, a class closes-to the exclusion of any potential beneficiary not then living-when at least one beneficiary has a vested interest.

When there is a contingent gift, the class closes at the date of the testator’s death if there is any living beneficiary who has met the condition.

If there is no beneficiary who meets the condition, the class remains open until the first beneficiary does.

Question 51

What must trustees satisfy to themselves when relying on investment advice of a third party?

Answer 51

The trustees are not liable for the loss if they reasonably believed the financial adviser was qualified to give proper advice by reason of the adviser’s ability and practical experience. Trustees are under a statutory obligation to take proper advice before making an investment decision.

Proper advice is the advice of a person the trustees reasonably believe to be qualified to give it by reason of their ability and practical experience.

If the trustees obtain proper advice, then their duty is discharged, and the trustees will not be liable for a loss.

Question 52

How should a court divide mixed stolen trust funds?

Answer 52

If a trustee mixes funds of two trusts in a current account, the traditional rule is that the first money into the account is the first money out of the account.

However, courts will instead divide the money proportionately if:

1. applying the first-in, first-out rule is contrary to the express or implied intention of the claimants,
2. it is impractical to apply the rule, or
3. applying the rule would cause injustice to the parties.

**NB don’t just divide the funds left - allocate proportion!!

Question 53

What is equality money, and when might it be used to acquire trust property?

Answer 53

The rules of intestate succession apply when a person dies without a will. Under these rules, when the deceased is survived by a spouse or civil partner and issue, the spouse or civil partner will receive personal chattels, £270,000, and one-half of the residue. The deceased’s issue will take the other half of the residue. However, a surviving spouse can require the personal representatives to appropriate the family home to the spouse in partial or total satisfaction of their interest. If the property is worth more than the spouse’s entitlement, the spouse can still require appropriation provided they pay over the difference-known as equality money-to the estate.

Question 54

What are the requirements of a charitable trust?

Answer 54

1. Charitable nature,
2. For public benefit, and
3. Exclusively charitable

Question 55

A trustee who has been domiciled outside the UK for [BLANK] months can be replaced.

Answer 55

12 months

Question 56

What is the fair dealing rule?

Answer 56

The trustee is permitted to purchase the life interest from a beneficiary if

1. they pay a fair price,
2. make full disclosure of all material facts to the beneficiary, and
3. in no way abuse their position.

This is known as the fair dealing rule, which applies to trustee purchases of beneficial interests.

Question 57

If the trustee has drawn money out of the account, the basic rule is that the trustee is treated as withdrawing their own money first.

BUT what is the trust money is gone?

Answer 57

When a trustee places trust funds into a bank account with the trustee’s own money, the beneficiaries can claim a charge over the account for the amount of trust funds in it.

However, if the trustee withdraws money from the account to purchase an asset and then dissipates the balance, the beneficiaries may claim the asset or a charge over it.

Question 58

Are trustees joint and severally liable for breaches of trust?

Answer 58

Not exactly.

A trustee is not vicariously liable for the actions of their co-trustee.

Trustess are liable for loss caused by their own breach of trust.

Joint and several liability applies when it has been established that more than one trustee is in breach.

NB - As between trustees who are in breach, a non-fraudulent trustee may claim an indemnity against the fraudulent trustee, but this does not affect liability to the beneficiaries.

Question 59

What is the duty to keep trust property in joint control? When is it breached?

Answer 59

Trustees must act jointly and must keep the trust property in their joint control.

EG - Trustees moved funds to a bank account where it was possible for one T to withdraw. Other trustee is in breach of trust because they should have ensured that the bank account required the consent of both trustees to the withdrawal of funds.

Question 60

What is the standard for the power of advancement?

Answer 60

The power of advancement is used for the beneficiary’s advancement or benefit; the standard is not education or maintenance.

Question 61

What must be established by B to hold a third party dealer in a breach personally liable, ie accessory liabilty to a breach of trust?

Answer 61

To bring a personal claim against the dealer, the beneficiaries must establish that the dealer did not act as an honest person would in the circumstances.

Where a third party acts as an accessory to a breach of trust, the third party becomes personally liable as if they were a constructive trustee.

*NB not necessary to show that the third party knew that breach of trust was committed.

Question 62

What must B establish to hold a third party in receipt of stolen trust property personally liable?

Answer 62

That the third party’s conscience was affected.