Head 24: Termination of Trusts Flashcards
How may a trust be terminated?
A trust may come to an end in a number of different ways. The most important are:
⁃ i) revocation by truster
⁃ ii) exhaustion of trust property
⁃ iii) termination by beneficiaries[ With the help of the court if necessary.]
Does a trust end where there are a lack of trustees?
A trust does NOT come to an end due to lack of trustees.
What is the power of revocation?
Truster has the power of revocation
⁃ A) where power expressly reserved in trust deed
⁃ B) in bare trust or a trust ‘for administration’ as the truster is the sole beneficiary
⁃ C) where no beneficiaries exist at the time of attempted revocation
⁃ E.g. You set up a trust for your grandchildren at a time when you have 1 and it is likely more will be born. As there is a beneficiary in existence at that point the trust cannot be revoked. But suppose the sole grandchild dies. At this point there is no beneficiary and thus the trust can be revoked by the truster even though there is a possibility that further grandchildren may be born.
⁃ NB this is different from the situation where it was clear that there could be no more grandchildren (e.g. due to the elderly age of the children) where there are no trust purposes so the property returns to the truster by means of the resulting trust.
What is the exception to the no-beneficiary rule for ante-nuptial marriage contracts?
These are contracts before marriage to provide for the spouses and children born of the marriage. Since they were done before marriage, at the point they were created there were no beneficiaries. But these trusts cannot be revoked as long as the birth of children remains a possibility. But see these cases:
Watt v Watson 1897
⁃ Trust by a woman set up by her for herself and her husband and the children of the marriage. No children were born. The woman could revoke with the agreement of her husband because he was a beneficiary.
⁃ [So this is an example of revocation because the only two beneficiaries who could possibly be in existence agreed it should be terminated - (not revocation because no beneficiaries).
*Bertram’s Trs v Bertram 1909
⁃ He set up a trust for himself, his wife if they married and children if they had any. He never married so he was the sole beneficiary and thus he could revoke the trust (in effect it was a trust for administration).
⁃ Bertram then provided that should he die without children the trust property was to be distributed between his brother and his step-sister. But the court held that these were not beneficiaries - this was really a will at this point.
What is the exhaustion of trust property?
When all trust property has been paid out to the beneficiaries in accordance with the trust purposes, the trust comes to an end. This is the usual cause of termination.
What happens upon exhaustion of the trust property?
Trustees should get discharge from beneficiaries, or from court under s 18 of the Trusts (Scotland) Act 1921[ This may be because the beneficiaries refuse to discharge the trustees (e.g. they think something dodgy is going on).
Or it could be because the beneficiaries are incapable of signing a discharge.].
⁃ This personally bars the beneficiaries from raising issues against the trustees relating to the accounts (they are not barred in relation to latent fraud or undisclosed breaches of trust).
Can the beneficiaires terminate the trust?
Yes - see Head 21
