THE TRUST RELATIONSHIP Flashcards

1
Q

what is a trust

A

a legal mechanism whereby trust property is held by one party for the benefit of another

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2
Q

what does a trust involve the division of

A

the division of the legal and equitable title to the trust property

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3
Q

trusts grant proprietary rights to beneficiaries and impose mandatory equitable obligations on trustees - true or false

A

true

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4
Q

for there to be a trust, what must there be to enforce the obligations of the trustess

A

beneficiaries

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5
Q

a trustee is the legal owner and manager of trust property, which they hold on trust for the beneficiaries as beneficial owners of the trust property in equity - who is the absolute owner of the trust property

A

neither the trustee nor the beneficiary - they are both limited owners

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6
Q

what are the four key components to a trust

A
  1. settlor
  2. trustee
  3. beneficiary
  4. trust property
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7
Q

what is the settlor

A

the person who creates the trust

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8
Q

the settlor generally begin by holding absolute title to the trust property - in order to create the trust what must they do

A

they must either transfer the property to the trustees to hold the property on trust fir specified beneficiaries or they could declare themselves a trustee of the property

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9
Q

which title does the trustee hold

A

the trustee holds the legal title of the trust property on trust for the benefit of the beneficiaries

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10
Q

is it possible for the trustee to also be a beneficiary under the trust

A

yes in some circumstances

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11
Q

which title does the beneficiary own

A

the equitable title to the trust property
(aka beneficial title)

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12
Q

what is the trust property - are there any requirements for what can or can’t be trust property

A

the trust property, or subject matter of the trust, can be any kind of property
personalty (personal property)
or real property

may be land, money, shares etc or a combo of different types of property

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13
Q

structure of simple trust

A

settlor
trustee (legal title)
beneficiary (equitable title)

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14
Q

what are the four categories that trusts can be categorised into

A

express
implied
inter vivos
testamentary

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15
Q

what is an express trust and who creates them

A

theyre expressly created by the settlor

they are created intentionally rather than being implied by the courts or the conduct of the parties

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16
Q

what are implied trusts and how do they arise

A

trusts that arise by operation of the law

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17
Q

what are the main types of implied trust

A

resulting and constructive trusts

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18
Q

inter vivos trust (lifetime trust)

A

a trust established during a persons lifetime

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19
Q

testamentary trust - when does it take effect

A

a trust that takes effect on an individuals death (most often via their will)

20
Q

what is a bare trust (absolute trust)

A

in a bare trust a sole beneficiary has the absolute and immediate right to the capital and assets within the trust

21
Q

in a bare trust, a sole beneficiary has the absolute and immediate right to the capital and assets within the trust, do they also have the absolute and immediate right to the income generated from these assets

A

yes as long as the beneficiary is of full age and capacity

22
Q

in a bare trust does the trustee have any discretion as to how the trust property is dealt with

A

no

23
Q

a bare trust is a simple form of fixed trust - true or false

A

true

24
Q

bare trusts may be express or implied - true or false

A

true

25
Q

bare trust example

A

i leave all my property to my solicitor to hold on trust for my wife

26
Q

under a fixed trust does the trustee have discretion as to the choice of beneficiaries or the extent of their entitlement to the trust property

A

no

27
Q

what effect does a fixed trust have on the identity of the beneficiaries and their relative shares

A

the identity of the beneficiaries and their relative shares are fixed at the outset

28
Q

i leave all of my property to my spouse to hold on trust in equal measures for my children - what type of trust is this

A

fixed trust

29
Q

under a discretionary trust, what do the trustees have discretion to decide

A

they have discretion to decide how the trusts income and/or capital are apportioned amongst the beneficiaries

30
Q

under a discretionary trust, the trustee may have some discretion as to the choice of beneficiaries - true or false

A

true

31
Q

i leave all of my property to my spouse, to divide in such proportions as they think fit amongst my children and grandchildren - what kind of trust is this

A

discretionary trust

32
Q

interest in possession trust - life interest trust

the beneficiary is granted a right to the trust property for a specific period of time (typically for their lifetime, in which case they’re known as life tenant)

what is this typically the right to receive

A

this is typically a right to receive the income generated by trust property
or in the case if a house might be the right to live in the property

33
Q

in a interest in possession trust, does the beneficiary have all or limited rights to the trust capital

A

the beneficiary typically has only limited (if any) rights to the trust capital

34
Q

interest in possession trust

upon the expiry of the period, (on their death in the case of a life interest) who does the trust property pass to

A

it passes to the residuary beneficiary (remainderman)

35
Q

i leave the income from my shares in ABC PLC to my spouse for their lifetime, and after their death the capital to pass to my children - what trust is this an example of

A

interest in possession trust - aka life interest trust

36
Q

a resulting trust is a form of implied trust - true or false

A

true

37
Q

a resulting trust is a form of implied trust, under which the beneficial interest in the trust property is returned (results back) to who

A

to the settlor

38
Q

resulting trusts arise in several situations, for example where an express trust fails due to lack of certainty of objects - what are the two types of resulting trust

A

presumed resulting trusts
automatic resulting trusts

39
Q

is a constructive trust a form of implied trust

A

yes

40
Q

when will a constructive trust be imposed by the courts

A

where it would be unconscionable for the legal owner of the property to deny the beneficial interest of the beneficiary

41
Q

what is the objective of a charitable trust

A

a charitable trust is a trust with the objective of furthering one or more specified charitable purposes for the benefit of the wider public, rather than for the benefit of individual beneficiaries

42
Q

trusts must satisfy the three certainties - what are these

A

certainty of intention, subject matter and objects

43
Q

in some cases a trust disposition will need to comply with particular legal formalities - the formalities that must be complied with will depend on a number of factors…

A
  • is it a lifetime or testamentary disposition
  • what type of property is the trust being declared over (eg land)
  • is the transfer a declaration of a new trust or the transfer of an existing equitable interest
44
Q

there are specific rules which need to be complied with when transferring property to another person - the rules will depend on the type of property being transferred

what is the general rule

A

if the transferor fails to use one of these methods, the transfer will fail as ‘equity will not perfect an imperfect gift’ and ‘equity will not assist a volunteer’

45
Q

what are the exceptions to the general rule

A
  • the transferor has one all in their power
  • fortuitous vesting
  • proprietary estoppel
  • donatio mortis causa