MCQs Flashcards
A woman recently died. Her valid will contains the following clauses:
‘1. I give £10,000 to my trustees to be distributed amongst my children in such shares as my trustees shall determine.
I give £10,000 to my trustees to pay an ample sum to my brother.’
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 trust in clause 2 is valid but the trust in clause 1 is void.
The trusts in clauses 1 and 2 are void.
The trusts in clauses 1 and 2 are valid.
The trust in clause 1 is valid but the trust in clause 2 is void.
The trust in clause 1 is valid but the trust in clause 2 is void.
Certainty of subject matter comprises two requirements. The second requirement is the beneficial entitlement requirement: it must be possible to ascertain the nature and extent of the beneficiary’s interest in the trust property. In relation to clause 1, it is possible to ascertain the extent of each beneficiary’s interest by reference to the trustees’ determination. However, in relation to clause 2, it is not possible to ascertain the extent of each beneficiary’s interest because ‘ample sum’ is an uncertain measure. (How much is an ‘ample sum’?) As a result, the trust in clause 2 is void for uncertainty of subject matter.
A woman declares a trust of three of her five paintings, and 100 of her 200 ordinary shares in a private company, in favour of a man. The woman does not segregate or otherwise identify the three paintings or the 100 shares to be held on trust.
Which statement best describes the effect of the woman’s declaration?
The woman holds 100 shares and three paintings on trust for the man. She remains the full legal owner of the other 100 shares and two paintings.
The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
The woman holds 100 shares on trust for the beneficiary. She remains the full legal owner of the other 100 shares. She holds the paintings on a resulting trust for herself.
The woman does not hold any shares or paintings on trust for the man. She remains the full legal owner of all the shares and paintings.
The woman holds three paintings on trust for the man. She remains the full legal owner of the other two paintings and all the shares.
The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
Certainty of subject matter comprises two requirements. The first requirement is the trust property requirement: it must be possible to identify the trust property. The woman has failed to identify the three paintings to be held on trust and, as a result, it is not possible to identify the trust property. By contrast, the woman’s failure to identify the 100 shares to be held on trust is not fatal because a person can declare a valid trust of x of their (x+y) shares of the same type in the same company without identifying the x shares to be held on trust.
A woman recently died. Her valid will contains the following clause:
‘I give £10,000 to my husband absolutely. I trust him to use it fairly vis-à-vis our children.’
The executor of the woman’s will has paid £10,000 to her husband.
Which statement best describes the husband’s position in relation to the £10,000?
The husband holds the money on a fixed trust for the children.
The husband is the full legal owner of the money.
The husband holds the money on a discretionary trust for the children.
The clause is void and the husband receives nothing.
The husband holds the money on a fixed trust for himself and the children.
The husband is the full legal owner of the money.
The £10,000 is given to the husband ‘absolutely,’ which is consistent with a gift. The words ‘I trust him to’ are not sufficiently imperative to impose a duty (a trust) in relation to the money. This is supported by the fact that the content of any supposed duty – the ‘fair’ use of the money – is entirely vague.
A company transfers possession of its goods, but not its title to them, to a man. The company and the man agree that the man will try to sell the goods on behalf of the company and that he will return to the company any goods that he is unable to sell. They also agree that the man will pay the proceeds from any sales into a separate bank account and that he will transfer the sum credited to that account to the company at the end of each week. The man sells some of the goods. He pays the proceeds of sale into a separate bank account.
Which statement best describes the man’s relationship with the company?
The man’s relationship with the company is not fiduciary in nature: it is merely contractual.
The man is an agent for the company.
The man is a bailee for the company.
The man is a bailee, an agent and a trustee for the company.
The man is a trustee for the company.
The man is a bailee, an agent and a trustee for the company.
The man has possession of (but not title to) the company’s goods. This creates the relation of bailor and bailee. The man is authorised to sell goods on behalf of the company. This creates the relation of principal and agent. The man has paid the proceeds of sales into a separate bank account, which he must transfer to the company. This creates the relation of trustee and beneficiary.
A testator’s validly executed will contains the following clause:
“My trustees shall hold my engagement ring and my wedding ring on trust until my daughter reaches the age of 21. She may then choose one of the rings for herself. After my daughter makes her choice, my trustees shall give the other ring to my niece.”
The testator’s daughter dies before reaching the age of 21. The niece is still alive.
Which one of the following statements is the best advice to the trustees as to the niece’s entitlement to a ring under the testator’s will?
The niece is entitled to a ring chosen by the court.
The niece is not entitled to either ring.
The niece is entitled to the ring of her choice.
The niece is entitled to both rings.
The niece is entitled to a ring chosen by the trustees.
The niece is not entitled to either ring.
The intended trust fails for uncertainty of subject matter, specifically beneficial entitlement as in the case of Boyce v Boyce. There was a mechanism for determining beneficial entitlement but that mechanism can no longer be used because the daughter died without making her choice.
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 trust and the power are void.
The trust is valid but the power is void.
The trustees can determine whether the trust and the power are valid.
The trust and the power are valid.
The power is valid but the trust is void.
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 together have the right to terminate the trust.
The man has an interest in possession and the woman has a contingent interest in remainder.
The man and the woman have interests in remainder.
The man and the woman have contingent interests.
The man and the woman have interests in possession.
The man has an interest in possession and the woman has a contingent interest in remainder.
The man has an immediate right to income. The woman’s interest is contingent because she is only entitled to the capital if she reaches the age of 25. Her interest is in remainder because she is only entitled to the capital after the man dies.
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 can terminate their trust. The beneficiaries of Trust B cannot terminate their trust.
The beneficiaries of Trust A and Trust B can terminate their respective trusts.
The beneficiaries of Trust B can terminate their trust. The beneficiaries of Trust A cannot terminate their trust.
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 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 trust in clause 1 is valid but the trust in clause 2 is void.
The trustees can determine whether the trusts are valid or void.
The trust in clause 1 is void but the trust in clause 2 is valid.
The trusts in clauses 1 and 2 are valid.
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?
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.
His rights will be determined by the trustees.
He has a duty to appoint the trust capital.
He is entitled to the trust income during his lifetime.
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.
Which of the following most accurately correctly describes the statutory powers of trustees to purchase land?
Trustees may purchase land in the UK but only for occupation by a beneficiary.
Trustees may purchase land in the UK or overseas but only as an investment.
Trustees may purchase land in the UK but only as an investment
Trustees may purchase land in the UK or overseas, whether as an investment or for any other purpose, including occupation by a beneficiary.
Trustees may purchase land in the UK, whether as an investment or for any other purpose, including occupation by a beneficiary.
Trustees may purchase land in the UK, whether as an investment or for any other purpose, including occupation by a beneficiary.
Section 3 Trustee Act 2000 gives trustees a wide power to invest in any property, but in the case of land this must be read in conjunction with section 8 which provides that trustees may only acquire land in the UK. This land may be purchased as an investment, for occupation by a beneficiary or for any other reason.
A solicitor trustee and a lay trustee held a majority shareholding in a company on trust. The solicitor trustee was elected to the board of directors but did not attend board meetings and was unaware that the company was being mismanaged. The shares have halved in value since they were acquired by the trustees.
As a result of the failure to supervise and safeguard the trust investment a breach of the trustee duty of care and skill has occurred.
Which of the following most accurately describes the liability of the trustees?
The trustees will be jointly and severally liable. There is no defence available to either trustee because the trust was a majority shareholder.
Only the solicitor trustee will be liable, because they were the trustee elected to the board of directors.
The trustees will be jointly and severally liable. However, the lay trustee should apply for an indemnity because of the solicitor trustee’s overbearing influence.
The trustees will be jointly and severally liable, although it may be possible for the lay trustee to apply to apportion greater liability to the solicitor trustee.
Only the solicitor trustee will be liable, because they are acting in a professional capacity.
Lay trustees decided to invest in a company having read positive reviews in the press. The company share price was increasing rapidly so they invested immediately without seeking further advice.
Six months later the company was publicly criticised for having breached data protection regulations on numerous occasions, and as a result the share price plummeted.
Have the trustees acted in breach of their investment obligations under the Trustee Act 2000?
Yes, by relying on the press reports and not seeking any other advice.
No, because the trustees are not acting in a professional capacity.
Yes, because they did not first seek the consent of the beneficiaries.
No, because it is reasonable to rely upon advice in the press.
No, because the events which caused the loss were not in the public domain at the time the trustees made the investment decision.
Yes, by relying on the press reports and not seeking any other advice.
The trustees are under an obligation to take proper advice and it is unlikely that this has been satisfied by reliance on press reviews (s 5 of the Trustee Act 2000).
You are advising the two trustees of a discretionary trust in relation to the following events, each of which was a breach of duty by the trustee resulting in loss to the trust fund:
Trustee A made a transfer from the trust bank account to settle an invoice received by the trust.Trustee A later discovered that the recipient account details were entered incorrectly, the funds have been paid to an overseas bank in error and it may not be possible to recover this money. Trustee B withdrew £2,000 from the trust bank account and used this to repay outstanding gambling debts.
The trust instrument contains an exemption clause which absolves the trustees from all liability for loss to the trust fund as a result of any breach.
Who may rely on the trustee exemption clause?
Trustee A only.
Following Armitage v Nurse, an exemption clause which exonerates a trustee from liability can be enforced in respect of any breach other than a fraudulent or dishonest breach of trust. Trustee A was negligent but was not dishonest. Trustee B has stolen from the trust which is an act of dishonesty and therefore Trustee B cannot claim the benefit of the exemption clause, irrespective of how widely it is drafted.
