Questions/Areas of difficulty (Trusts) Flashcards
How can personal representatives of a will obtain valid receipt for a gift made to an unincorporated association?
If the will is silent on this point, but the personal representatives want to obtain good receipt:
- they would need to obtain a receipt from all the members of the association
What will happen to a gift in a will subject to a contingency which was not satisfied?
If the gift was subject to a contingency which was not satisfied, the gift never vested. The gift therefore fails and falls into the residue of the estate
E.g.,
A woman has died leaving a valid will. The will contained a gift to the woman’s son which was contingent on him attaining the age of 25. The son survived the woman but died six months later, aged 21.
- the gift will fall into residue as it has not vested
What happens to a gift left to ‘friends’ in a will?
Whilst it may be possible for a beneficiary to demonstrate that they are a friend, it is likely that the gift will fail for uncertainty
Where a gift is made to a class of beneficiaries, do not need to name them but it should be possible to identify them with certainty
Do trustees have any discretion to distribute trust property under a fixed trust?
No - the trustees are required to distribute n accordance with the terms of the trust deed
- The court cannot grant discretion to vary the terms either
What is the perpetuity period for trusts? The maximum possible duration of a trust allowed by law?
125 years
This means that if a clause in a trust provides: “The duration of the trust is stated to be ‘the maximum period allowed by law or the life of my only daughter, plus 21 years, whichever is longer’”
- if the daughter dies –> the maximum duration is 125 years
- max period allowed by law = 125 years
What is the rule against inalienability (perpetuity)
Common law period of 21 years
- this only applies to establishment or operation of non-charitable purpose trusts (does not apply to most trusts, other than non-charitable purpose trusts)
What are the requirements for a charitable purpose trust?
- for a charitable purpose
- satisfy a public benefit test
- wholly + exclusively charitable
A man entered into a contract in reliance on a misrepresentation. He transferred an asset to the other party to the contract, which was then rescinded.
Who is entitled to the asset following the rescission of the contract?
The asset is held on resulting trust for the man
As the contract is rescinded, it would be held on resulting trust
What happens if the wording of a charitable trust is too wide (e.g., objects too wide)
For a charitable trust to be valid, its objects must be exclusively charitable. If the wording is too wide and would allow funds to be used for non-charitable purposes, this would prevent the trust from having charitable status
What are the elements of a proprietary estoppel claim?
- An assurance made to the claimant
- Reliance by the claimant on the assurance
- Detriment to the claimant in consequence of their reliance
- Unconscionable to resile
Is proprietary estoppel likely to be available for a commercial arrangement?
No, it is unlikely to be available. Even if someone relies on the agreement to their detriment, if it is a commercial arrangement and equity will not generally introduce uncertainty into a commercial situation
What happens if a gift is made subject to a condition precedent?
It is not always possible to ascertain whether the condition is met by potential beneficiaries. It is possible for the will to nominate a suitable expert to determine which beneficiaries, if any, meet the condition and are entitled to receive the gift
Can the court impute intention when establishing a common intention constructive trust?
First, the claimant would need to rebut the presumption that equity follows the law. The court may then consider a wide range of factors, including finance. The court may impute the intention of the parties from the evidence if necessary.
The court can impute intention when quantifying the parties’ interest but not when rebutting the presumption of a joint tenancy
Can an executor of a will acting in a professional capacity charge for their work?
Solicitors may charge for their professional services at their usual rate (reasonable expenses)
Normally executors cannot profit from their role
What is the position with regard to trustees’ right to charge for their time?
A trustee who is acting in their professional capacity may make a reasonable charge for their services. Lay trustees may charge if the trust instrument allows them to do so
Can trustees profit from their office?
NO - not permitted for a trustee to profit from office, but trustees acting in the course of their profession may charge a reasonable fee for their work
What is the trustee’s power to improve and maintain trust property?
The trustees may use trust funds to repair and improve a property owned by the trust if they decide it is appropriate to do so. This is not restricted to what can be funded out of income and capital can be used if necessary
What are trustee obligations in regard to monitoring the use of income given to minor beneficiary’s guardians?
Provided that the trustees have acted in good faith, they are not under an obligation to verify whether the funds paid to the guardian are being used for the beneficiaries
They are not under an obligation to monitor how the guardians of minor beneficiaries use the money, unless there are indications that payments are being misappropriated
However, it is an improper exercise of the power to unquestioningly pay it to the minor’s parent or guardian, assuming they will use it for the minor’s benefit
What are the trustees’ powers of sale?
Trustees have power of sale over assets of a trust and are not required to consult minor beneficiaries before selling an asset, unless there is a particular provision in the trust which requires them to do so
What are the trustees’ powers of advancement?
For a trust set up after 1 October 2014, trustees may advance their share of the capital for the use of each beneficiary during their minority
What does the trustees’ power of investment of land extend to?
Trustees may purchase property in the UK for occupation by a beneficiary if they consider it appropriate
What is an executor’s power to settle a claim against a deceased?
The executors may settle a claim against the estate if they consider it appropriate, but they would need to ensure that they acted in accordance with their duty to the estate
What is the standard for duty of care for trustees?
Each must act with such care and skill as are reasonable, taking into account their level of knowledge
What are beneficiaries’ rights against an executor carrying out the administration of an estate?
The beneficiaries have a right to require the estate to be properly administered and may apply to court for an order to that effect
What is the most appropriate course of action for beneficiaries if they wish to recover their losses after an negligent administration of an estate?
The executor is personally liable and beneficiaries may sue to recover their losses
What is the position for a trustee with conflicting interests?
The trustee will be in breach of their fiduciary duties if there is a conflict of interest. They will be personally liable for any loss suffered and the transaction will be voidable
Consent of beneficiaries will not prevent a breach of this duty
What is the remedy available to beneficiaries following a company in which a trust portfolio had shares in going into insolvent liquidation and being wound up?
The court may award equitable compensation for the difference between the value of the shares and the purchase price agreed
Is a trustee still bound by a duty not to profit following resignation?
The duty not to profit does not apply if a trustee resigns for valid reasons - they are no longer bound by fiduciary duties
What is the position regarding liability of trustees?
If a trustee has acted honestly, reasonably and ought fairly to be excused, the court has a discretion to relieve that trustee individually
For how long does a trustee remain liable for breaches of trust after they retire?
A trustee will remain liable for breaches committed prior to retirement, but not for those committed afterwards (in the absence of any agreement to the contrary)
Those breaches which arise after are not within the retired trustee’s knowledge of control - no liability
What must a trustee do if they wish to advance the capital of a trust to a remainderman?
Trustees would be required to obtain the written consent of the life tenant to advance the sum
Trustees’ general duty to obtain investment advice
Trustees have a general duty to obtain investment advice, unless they consider it unnecessary or inappropriate (e.g., the amount is modest and the cost of advice is significant)
What is the status of a self-dealing transaction?
It is voidable, rather than void
What is a delay to beneficiaries bringing a claim for self-dealing?
As with most equitable remedies, delay is likely to act as a bar to rescission - if there is delay, the transaction is unlikely to be set aside
How do exemption clauses for trustees’ liabilities operate?
Cannot exclude liability for fraudulent breaches and trustees cannot rely on an exemption clause if they have acted dishonestly
Fundamental duty of honesty cannot be excluded
What is duty of care owed by trustees?
- ordinary trustees are subject to the ordinary standard - reasonable care and skill
- trustees with experience (e.g., solicitor) is subject to an elevated standard because of their knowledge/experience
- trustees being paid are subject to relevant standard because they are being paid for their role
