trust Flashcards
declaration of trust
The trust of Blackacre fails because there is no signed written evidence of the declaration. The settlor was attempting to create a trust of land with the friend as trustee. He needed to transfer the land to the trustee, which he has done, and make a valid declaration of trust. Such a declaration must comply with the requirements of certainty, the beneficiary principle, and the perpetuity rules. In addition, in the case of land, the declaration must be evidenced by some writing signed by the settlor. In this case, there is an oral declaration which complies with the requirements of certainty-the wording shows that the settlor intends the friend to be legally bound, the subject matter is Blackacre, and the object is the son. There is a human beneficiary who is already in existence so there are no issues relating to the beneficiary principle or perpetuity rules. However, there is no writing signed by the settlor to evidence the trust, and so it fails and Blackacre passes to the wife under the will.
joint tenantss
The teacher and solicitor will each receive one-half of the sale proceeds. If the property transfer form states that the legal owners are to hold the property as beneficial joint tenants, the beneficial interest is held in equal undivided shares and will be divided equally on sale of the property. This is true regardless of the parties’ unequal contributions to the purchase price.
A settlor signs a document in which she appoints her son to be a trustee to hold her collection of paintings on trust for the son’s children. One month later the settlor dies. In her will, she appoints her son to be her executor and leaves all her estate to him. The paintings have always remained on display in the settlor’s house.
Which of the following best describes the position of the son in relation to the paintings?
The son holds the paintings on trust for his children because he is the executor of his mother’s will. Where an individual wishes to create a trust with a third party as trustee, she must transfer the trust assets to the trustee in the appropriate legal manner and declare the trusts on which the trustee holds. Here, the settlor made a valid declaration of trust which complies with the three certainties-it is clear that she intended her son to be legally bound as trustee, the trust property is clear, and the beneficiaries are the son’s children. The legal title to chattels is transferred either by delivery or by deed, neither of which has taken place here. However, where the intended trustee later acquires the legal title as personal representative of the settlor, the trust is regarded as completely constituted provided that the settlor’s intention to create the trust continued until death. There is no suggestion that this was not the case, so the son takes the paintings as executor and holds them on trust for his children as declared by the settlor.
A woman paid £25,000 towards her nephew’s purchase of an apartment costing £100,000. The apartment was conveyed into the nephew’s name alone, and there was no declaration or evidence as to the woman’s intentions. The woman and her nephew are now estranged, and the nephew has sold the flat for £120,000. The woman wishes to claim as much as possible from the sale proceeds.
How much can the woman properly claim?
The woman may claim £30,000 under a presumed resulting trust. Where an individual contributes to the purchase of property in the name of another and there is no evidence that a gift was intended, the usual presumption is that the legal owner holds on resulting trust for himself and the other party in proportion to their respective contributions. This presumption does not apply where the contributor was the father or husband of the legal owner, or was acting in loco parentis to the legal owner. In these cases the presumption of advancement applies and it is presumed that the contributor intended to make a gift unless he can prove that he did not.
trust of land
A trust of land must be evidenced by signed writing, then constituted by transferring legal title by deed. The title then must be registered in accordance with the requirements of the relevant statutory provision.
constructive trust
The non-legal owner’s claim is likely to succeed because they paid towards the purchase price. When a non-legal owner attempts to assert an equitable interest in the family home, the court will impose a constructive trust in favour of the non-legal owner if the non-legal owner can establish that: (1) the parties had a common intention, either express or inferred, that the non-legal owner should have an equitable interest in the property; and (2) the non-legal party relied to their detriment on the common intention. The court may infer a common intention from the parties’ conduct, such as the non-legal owner making a direct contribution to the purchase price or making mortgage payments. Here, the non-legal owner contributed to the purchase price of the house, which is likely sufficient to show that there was an inferred common intention that the non-legal owner should have an interest in the house. In addition, the non-legal owner can show that they relied to their detriment on the common intention by paying some of the purchase price
retiring of the trustee
The trustee may retire, but he and the continuing trustee must appoint a replacement. In the absence of express provisions in the trust instrument, statutory rules on the appointment and retirement of trustees apply. A trustee may retire without replacement only if he leaves in office two trustees or a trust corporation, and his co-trustees consent by deed. A trustee may be replaced where he desires to be discharged provided that a replacement trustee is appointed and the appointment is made in writing. The appointment must be made by the retiring and continuing trustees.
In her will a woman appointed two trustees to hold all her estate on trust for her son for life with remainder to his children in equal shares. The son wishes to raise a capital sum, and one of the trustees has offered to purchase the son’s life interest.
Which of the following statements best describes the position of the trustee?
Responses
The trustee may purchase the son’s interest provided she pays the full market value and makes full disclosure of all material facts. The ‘fair dealing rule’ applies to the purchase by a trustee of a beneficiary’s interest. A trustee may purchase the interest of a beneficiary provided that the price is fair and full disclosure of all material facts is made.
A trust was established in 2012, a clause of which provided that “the investment powers under the Trustee Act 2000 shall apply to this trust”. The trustees wish to make an investment in land.
Where can the trustees purchase land?
Responses
Under the Trustee Act 2000, trustees are limited to purchasing land in the United Kingdom.
A trustee places £10,000 of trust money into her own bank account, which has an existing balance of £1,000. She draws out £2,000 from the account to pay her rent and spends a further £1,000 on a painting. The breach has been discovered, and the trustee’s creditors are bringing bankruptcy proceedings against her. The painting is now worth £5,000, and the balance of £8,000 remains in the trustee’s bank account.
Which assets can be claimed for the trust in a proprietary claim?
The painting and £8,000 from the bank account can be claimed for the trust in a proprietary claim. Where a trustee mixes trust funds with her own in a bank account, the trust may claim a charge over the account for the amount of trust money in it. When funds are withdrawn from the account, the trustee is treated as spending her own money first. Following this rule, the rent payment consisted of the trustee’s £1,000 plus £1,000 of trust money. The painting was purchased with trust funds alone. Where a trustee purchases an asset with trust funds, the trust may claim the asset as representing trust property, or a charge over the asset for the trust funds it represents. In this case, the trust will choose to claim the painting as representing their lost £1,000, and will benefit from the rise in value of the painting. In addition, the trust can claim a charge over the bank account for the remaining £9,000 taken from the trust, and so will claim the whole balance of £8,000 left in the account. (The trust still has a personal claim against the trustee for the £1,000 of trust money spent on the trustee’s rent but will rank alongside the trustee’s other creditors in this claim.)
In 2013, a settlor transferred funds to trustees on trust for her son for life with remainder to her two grandsons in equal shares provided they attain the age of 25. The trust instrument contains no express powers. The elder grandson is now 21 and has asked the trustees to give him some of the capital to help set up a business. The younger grandson is 18.
Whose consent must the trustees obtain if they wish to comply with the elder grandson’s request?
advance payment
The trustees need to obtain the son’s consent if they wish to comply with the elder grandson’s request. Where a beneficiary has an interest in the capital of a fund, the trustees have power to advance capital for the beneficiary’s advancement or benefit. The trustees must obtain the consent of any beneficiary with a prior interest in the income of the fund. Here, the two grandsons each have a contingent interest in half the capital of the fund. The settlor’s son is entitled to the income of the fund, so he has a prior interest in the income of the shares of both grandsons.
A trustee arranged to transfer trust funds in breach of trust into the name of a company based offshore. The trustee enlisted the help of an accountant to set up the company and arrange the transfer. The accountant was not aware of the breach of trust but believed that the transfer was being made to avoid money laundering regulations.
What possible claim or claims can be brought on behalf of the trust against the accountant?
Responses
Correct
A
The trust can bring a personal claim in equity against the accountant. Where a third party acts as an accessory to a breach of trust, he becomes personally liable as if he were a constructive trustee. To establish accessory liability, it must be shown that the third party accessory was dishonest-that is, he did not act as an honest person would in the circumstances. It is not necessary to show that the third party knew that a breach of trust was committed. Here, the accountant believed that he was assisting in the avoidance of money laundering regulations, so he did not act as an honest person would in the circumstances and is personally liable in equity to make good the loss to the trust.
A settlor left land on trust for the employees of a corporation for use as a sports facility. The trust was limited to a perpetuity period of the lives of the settlor’s children living at the date of the trust’s creation and then for 21 years after the death of the last surviving child. No provision was made for a gift over at the end of the perpetuity period.
Is this a valid trust?
Responses
The trust is valid because it can be enforced by the identifiable individuals who are employees of the corporation. Generally, a trust for an abstract purpose which is not charitable will fail. However, a trust which appears to be for a private purpose is valid if it is actually for the benefit of ascertainable human beneficiaries who may enforce the trust. This is also known as a Denley trust. Here, the employees of the corporation can enforce the trust, and so it is a valid noncharitable purpose trust
In her will a woman gave £50,000 to trustees on trust to invest and use the income for the maintenance of the building of the Northgate Baptist Church. Shortly before her death, the church closed and the building was sold.
Which of the following best describes the legal position with respect to the trust?
Responses
The gift will be applied cy-pres if the court finds evidence of general charitable intention. Where a trust for a charitable purpose fails from the outset because it is impossible or impractical to carry out, the funds may be applied cy-pres to a similar charitable purpose provided that the testator has shown a general charitable intention. The court looks at the will as a whole to discern whether such an intention is present. This is a charitable trust because it is for a charitable purpose, it is for the public benefit, and it is exclusively charitable. The purpose cannot be carried out, so the result will depend on whether general charitable intention can be found
