Topic 6 Trusts & their uses

Question 1

An arrangement where a (Settlor) gives assets to a (Beneficiary) where the beneficiary does not gain control of the asset is called a what?

Answer 1

Trust

Question 2

Who looks after an asset for a Beneficiary?

Answer 2

Trustee

Question 3

If a “gift of reservation” is made by a Settlor. Is the asset viewed as being part of the settlors estate for IHT purposes?

Answer 3

Yes as they still benefit from the assest

Question 4

Benefits of placing assets in trust is what?

Answer 4

• Benefits can be paid out quickly
• Outside of the settlors estate for IHT purposes

Question 5

Which person is this in relation to a trust?

• Sets up the trust
• Appoints the trustee
• Usually a trustee

Answer 5

The Settlor

Question 6

Which person is this in relation to a trust?

• Appointed by the Settlor
• Must follow the trust deed

Answer 6

The Trustee

Question 7

The Trustee Act 2000 allows trustees to do what?

Answer 7

Invest as trust’s assets as if they owned them themselves

Question 8

What is a “Contingent Beneficiary”

Answer 8

A beneficiary who right an assest of a trust is dependent on something happening

Question 9

What are the 3 certainties a trust must have to be valid?

Answer 9

1. Intention
2. Subject matter
3. Object (Beneficiaries)

Question 10

A Settlor can revoke a trust once it’s assets have been settled into?

True or False

Answer 10

False

Question 11

What is a “Revokable Trust”?

Answer 11

A trust containing a deed that allows a trust to be revoked

Question 12

All these are what in relation to trusts?

• Money
• Shares / other investments
• Land or buildings
• Life assurance policies
  Valuables

Answer 12

Items that can be held in a trust

Question 13

If a Settlor has potential to benefit from a trust what is the trust know as?

Answer 13

Settlor Interested

Income received belongs to the Settlor

Question 14

What is a “Will Trust”?

Answer 14

A trust that is created through a will

Question 15

What is an “Absolute (Bare) Trust”?

Answer 15

A trust established for a Beneficiary who is absolutely entitled to the trust’s assets.

Can be demanded at any time

Question 16

Why are “Absolute (Bare) Trust” uncommon and inflexible?

Answer 16

The beneficiaries or the terms can not be changed?

Question 17

What is an “Interest in possession trust” (IIP)?

Answer 17

A trust where a Beneficiary receives income from the trust during their lifetime or an “event (Contingency)”

Question 18

What are examples of an “event (contingency)”

Answer 18

• Marriage
• Life event

Question 19

What are the 2 types of beneficiary of an “Interest in possession trust” (IIP)?

Answer 19

1. Life tenant (beneficiary with interest in possession)
2. Remaindermen (other Beneficiaries who benefit when life tenant dies or from an “event (Contingency)”

Question 20

Is a transfer to an “Interest in possession trust” (IIP) is subject to IHT as a CLT at 20% at the time of transfer?

True or False

Answer 20

True