Trustees: Dispositive Powers and Duties Flashcards
What duty do trustees owe when a beneficiary’s capital interest vests in possession?
A. They may delay distribution indefinitely until asked
B. They can choose to accumulate the capital for future beneficiaries
C. They must apply to court for direction
D. They must distribute promptly without unreasonable delay
D. They must distribute promptly without unreasonable delay
Explanation: Trustees have a duty to distribute capital as soon as it vests in possession. Delaying distribution unnecessarily is a breach of trust.
A trust states that Lucy is entitled to £20,000 on reaching 25. She turns 25 today. What should the trustees do?
A. Wait until she submits a formal request
B. Retain the money in case of unforeseen expenses
C. Accumulate the income generated until she turns 30
D. Distribute the money promptly, as her interest has vested in possession
D. Distribute the money promptly, as her interest has vested in possession
Explanation: Once a beneficiary reaches the specified age for a capital gift, trustees must distribute unless restricted by other terms.
Ben, aged 19, has a vested interest in income but not capital. How should the trustees deal with the trust income generated?
A. Pay income to Ben as it arises
B. Accumulate all income until Ben turns 25
C. Distribute capital and income together
D. Pay income only with court approval
A. Pay income to Ben as it arises
Explanation: Once a minor turns 18 and their interest in income is vested, trustees must distribute income as it arises.
Which of the following is TRUE about Saunders v Vautier?
A. It applies only if the trustee agrees
B. It allows trustees to override the trust
C. It allows adult, absolutely entitled beneficiaries to compel distribution of trust assets
D. It applies only where there is a will trust
C. It allows adult, absolutely entitled beneficiaries to compel distribution of trust assets
Explanation: This case provides that if all beneficiaries are of full age and capacity and absolutely entitled, they may demand early termination of the trust.
A trustee receives a request to appropriate an estate’s artwork (worth £9,000) to a beneficiary entitled to £10,000. What must the trustee do?
A. Agree, and make a balancing payment of £1,000
B. Refuse the request, as the value is too low
C. Sell the artwork instead
D. Distribute the artwork and deduct the £1,000 shortfall from the beneficiary’s next entitlement
A. Agree, and make a balancing payment of £1,000
Explanation: Appropriation is permitted if the item’s value is less than the entitlement. A cash balancing payment makes up the shortfall.
A trust states that Alice is entitled to £500. She requests trustees to give her the deceased’s watch, which was valued at £600 but is now worth £650. Can the trustees appropriate it?
A. Yes, because she requested it
B. Yes, but only with approval from all beneficiaries
C. No, because the current value exceeds her entitlement
D. No, unless she receives nothing else from the estate and trustees are willing to breach their duty
C. No, because the current value exceeds her entitlement
Explanation: Trustees cannot appropriate an asset worth more than the beneficiary’s entitlement unless the trust terms allow otherwise or the beneficiary pays the difference.
When must trustees accumulate income instead of distributing it?
A. When the income is due to a minor beneficiary with a contingent interest
B. When the trust is silent and the beneficiary is over 18
C. When income arises from sale of capital
D. When the beneficiary is entitled under intestacy
A. When the income is due to a minor beneficiary with a contingent interest
Explanation: Income must be accumulated where the beneficiary is a minor with a contingent interest, unless the trust says otherwise.
Which of the following is the most appropriate action when all debts and expenses have been settled and a residuary beneficiary has received an interim payment?
A. Wait until they ask for the final payment
B. Transfer remaining assets based on their initial share
C. Withhold funds in case of tax issues
D. Calculate and distribute the final balance due, shown in the distribution account
D. Calculate and distribute the final balance due, shown in the distribution account
Explanation: After debts, expenses, and legacies are resolved, trustees should distribute the remainder to the residuary beneficiary and reflect this in the estate accounts.
What is the correct method for trustees to transfer legal title in land to a beneficiary during distribution?
A. Using a declaration of trust signed by both parties
B. By delivery of the title deed to the beneficiary
C. Using Land Registry form AS1 (Assent) to formally transfer title
D. By notifying the mortgage lender and recording the transfer in writing
C. Using Land Registry form AS1 (Assent) to formally transfer title
Explanation:
Trustees transfer legal title in land using an assent (form AS1), which is the formal Land Registry process required to pass ownership from trustees to beneficiaries during administration.
A deceased’s will leaves all jewellery to their daughter. The jewellery is valued and held by the trustees. What is the correct method for trustees to transfer the jewellery to the daughter?
A. Recording the transfer in the estate accounts and posting the jewellery
B. Physical delivery of the jewellery to the beneficiary
C. Executing a formal deed of gift
D. Valuing the jewellery and paying an equivalent cash sum
B. Physical delivery of the jewellery to the beneficiary
Explanation:
The correct method for transferring chattels is physical delivery. No formal documentation is legally required unless the will specifies otherwise.
A will leaves £10,000 to a 17-year-old. The will is silent on receipt by minors. What is the best option available to the trustees to protect themselves when distributing this legacy?
A. Pay the money directly to the minor
B. Hold the funds on trust until the minor turns 18
C. Obtain written receipt from the minor’s friend
D. Include the legacy in the estate accounts only
B. Hold the funds on trust until the minor turns 18
Explanation:
Unless there is a clause in the will allowing otherwise or a parent can give valid receipt, trustees should hold the money on trust under s 42 AEA 1925 or similar provisions until the minor turns 18.
Which of the following clauses in a will would effectively relieve trustees from needing to retain assets until a minor beneficiary reaches age 18?
A. “I leave all my estate to be distributed as soon as possible”
B. “My trustees may accept receipt from any minor aged 16 or over”
C. “My trustees must pay all legacies within six months”
D. “No distribution shall be made until all debts are paid”
B. “My trustees may accept receipt from any minor aged 16 or over”
Explanation:
This is a valid relieving provision, allowing trustees to accept receipt from a 16- or 17-year-old, which would otherwise not be allowed. It protects the trustees and allows earlier distribution.
