THE TRUST RELATIONSHIP Flashcards
what is a trust
a legal mechanism whereby trust property is held by one party for the benefit of another
what does a trust involve the division of
the division of the legal and equitable title to the trust property
trusts grant proprietary rights to beneficiaries and impose mandatory equitable obligations on trustees - true or false
true
for there to be a trust, what must there be to enforce the obligations of the trustess
beneficiaries
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
neither the trustee nor the beneficiary - they are both limited owners
what are the four key components to a trust
- settlor
- trustee
- beneficiary
- trust property
what is the settlor
the person who creates the trust
the settlor generally begin by holding absolute title to the trust property - in order to create the trust what must they do
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
which title does the trustee hold
the trustee holds the legal title of the trust property on trust for the benefit of the beneficiaries
is it possible for the trustee to also be a beneficiary under the trust
yes in some circumstances
which title does the beneficiary own
the equitable title to the trust property
(aka beneficial title)
what is the trust property - are there any requirements for what can or can’t be trust property
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
structure of simple trust
settlor
trustee (legal title)
beneficiary (equitable title)
what are the four categories that trusts can be categorised into
express
implied
inter vivos
testamentary
what is an express trust and who creates them
theyre expressly created by the settlor
they are created intentionally rather than being implied by the courts or the conduct of the parties
what are implied trusts and how do they arise
trusts that arise by operation of the law
what are the main types of implied trust
resulting and constructive trusts
inter vivos trust (lifetime trust)
a trust established during a persons lifetime
testamentary trust - when does it take effect
a trust that takes effect on an individuals death (most often via their will)
what is a bare trust (absolute trust)
in a bare trust a sole beneficiary has the absolute and immediate right to the capital and assets within the trust
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
yes as long as the beneficiary is of full age and capacity
in a bare trust does the trustee have any discretion as to how the trust property is dealt with
no
a bare trust is a simple form of fixed trust - true or false
true
bare trusts may be express or implied - true or false
true
bare trust example
i leave all my property to my solicitor to hold on trust for my wife
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
no
what effect does a fixed trust have on the identity of the beneficiaries and their relative shares
the identity of the beneficiaries and their relative shares are fixed at the outset
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
fixed trust
under a discretionary trust, what do the trustees have discretion to decide
they have discretion to decide how the trusts income and/or capital are apportioned amongst the beneficiaries
under a discretionary trust, the trustee may have some discretion as to the choice of beneficiaries - true or false
true
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
discretionary trust
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
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
in a interest in possession trust, does the beneficiary have all or limited rights to the trust capital
the beneficiary typically has only limited (if any) rights to the trust capital
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
it passes to the residuary beneficiary (remainderman)
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
interest in possession trust - aka life interest trust
a resulting trust is a form of implied trust - true or false
true
a resulting trust is a form of implied trust, under which the beneficial interest in the trust property is returned (results back) to who
to the settlor
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
presumed resulting trusts
automatic resulting trusts
is a constructive trust a form of implied trust
yes
when will a constructive trust be imposed by the courts
where it would be unconscionable for the legal owner of the property to deny the beneficial interest of the beneficiary
what is the objective of a charitable trust
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
trusts must satisfy the three certainties - what are these
certainty of intention, subject matter and objects
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…
- 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
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
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’
what are the exceptions to the general rule
- the transferor has one all in their power
- fortuitous vesting
- proprietary estoppel
- donatio mortis causa
