Trusts Flashcards
What are the 3 characteristics of a Trust
Intention/words - trust
Subject- property
Objects - beneficiaries
Why are trusts set up (reasons)
Legal and admin purposes if beneficiaries are minors
Protections for mentally incapable beneficiaries
Tax planning purposes
Name 9 main trust law
1925
Trustee act
Law of property act
Admin of estates act
1987 recognition of trusts act
Trustee delegation 1987
Trust if land and appointment of trustees act 1996
Trustee delegation act 1999
Trustee act 2000 (N.I has its own)
p&Acc 1964/2009
IHT and trustee power act 2014
What is common law also known as?
Case law
Precedent law
What is a trust
Where a person (settlor) crests legal obligation over property that requires others (trustee) to deal with property for benefit if others
Overview of trustee power and duty
They are accountable to manage, employ or dispose of assets in accordant with terms of trust
Explain difference in ownership - trustees and beneficiaries
Trustees are legal owners
Beneficiaries have equitable or beneficial ownership - they couldn’t claim on life policy the trustees would have to
Name 5 type of assets
Realty - freehold interest in land
Personality -
- chattels personal -
- choses in action - intangible assets - life policy, CRO, debts, reversionary interests and shares
Could be taken immediately or in the future (debts due to be repaid.
Choses in possession tangible objects or art, Jewellery
Collectives and shares
Bonds (non income producing so no tax returns needed)
What is difference between contract and trust law
Trust
No agreement between parties
Beneficiaries might not know
No offer and acceptance
No consideration
Minors
Trustees legal owners
Contract
Need agreement
Consideration
Cannot make with minors
L
What is a protector
An additional person who has the power to veto certain decision s made by trustees
Good if you have professional trustees
Duties and responsibilities of trustees ( exc investment powers)
- adhere to trust deed
- protect trust property (or deeds/contract notes)
- registered as legal owners
- must act in benefit if beneficiaries impartially
What are the standard trustee investment powers and duties (5)
Take account of standard investment criteria
Review and vary investments as required
Obtain proper advice unless deemed not appropriate
Must invest trust money and review
Take account of tax position
Keep proper account
Act with utmost diligence
Avoid conflicts of interest
Trustee act 1925 - what are 4 statutory powers of trustees
- Power to apply trust income to infant beneficiaries for maintenance, education or benefit
- Override the right to income at age 18 (specified age in trust)
- Can advance a beneficiary their presumptive share - depending on obtaining permission from other beneficiary
- Invest trust assets
When can you replace a trustee? (7)
The appointer or settlor can:
- Trustee dies
- Remains out of Uk for 1 year plus
- Wants to be discharged
- Refuses to act
- Unfit (bankrupt)
- Mentally incapable
- Is an infant
When can you replace a trustee
dies
out of uk for 12m plus
wants to be replaced
refuses to act
unfit or incapable
an infant
What is an appointer and what can they do
in addition to trusts
detailed in trust deed - check wording for powers
normally power to remove trustess
When can beneficiaires retire trustees
All beneficiaries at least 18
have full capacity
absolutely entitiled
If trustee is mentally incapable can direct the attorney to appoint a replacement
What happens on death of trustees (3 scenarios)
- the surviving trustee can appoint replacement
- the last trustee die - their LPR can act until replacement found
- if an appointer they can appoint
What powers cannot be delegated (Trustess) 4
distribution of trust assets
how fees are dealt with
appointment of new trustess,nominees or custodians
delegation of trustee powers
Name some examples of breaches trust
- not paying money due to a beneficiary
- not investing trust money appropiately
What happens to trustees if they breach
- issue an injunction to prevent the trustees baking course of action that will cause the breach
- Order the trustee to make restitution by makking appropriate payment to beneficiary
- order the return of trust property
not liable to compensate losses that would have been suffered if that breach had not been committed.
How can you end a trust (5)
All beneficiaries are ascertained
there is no possibility of further beneficiaries
they are all of full age with capacity
unaminous agreement
Saunders v Vautier
What are express trusts and name some examples (3)
Expressly set out terms of trust
Bare
Absolute
Discrectionary
Relevant Property
what is an enduring EPA & points
Ended October 2007
Both financial and health
Lost mental capacity can use
What are the various requirements for an LPA to be valid ? (5)
written in prescribed form
Donor and attorney must be 18+
Donor must have mental capacity
Donor and attorney must state they understand the POA and the duties
Certificate from prescribed person confirming that the donor undersand the LPA and no fraud/pressure
When can a donor revoke a LPA
They have capacity (donr)
bankruptcy of donor or attorney
death of attorney
dissolution of marriage between donor and attorney
incapacity of the attorney
Explain registratiion process of LPA
Needs to be registered with Office of Public guardian
takes 8-10 weeks
normally registered when creaster
£82
If need to make a correction to be done within 3 months and £41
Name the benefits of LPA
You can choose the decisions you want to be made on their behalf, if they lose capacity
choose the people you want to make the decisions
how they want the people to make the decisions
Name duties of a LPA (7)
Make decisions in best interst of donor
only make authorised decisions
consult with donor prior to action where possilbe and others who may have an interst in the donors affairs
keep own money seperate
confidential
no conflict of interest
What are the extra duties under an EPA (exp Oct 2007)
act in the best interests and consider their needs and wishes as far as possible
not taking advantage of the donors position to gain any benefit
keep donors money seperate
Explain when POAs can make gifts (LPA/FPA/EPA_
on customary occasions (ie birthdays)
charities they may have donated to previously
to provide for the donees needs (ie buy clothes for them)
IHT gifts if specifically worded
What are the main bodies for the MCA 2005 (1/10/7)
court of protection
office of public guardian
independent mental capacity advocate (imca)
Name 5 key principles of MCA
- Every adult has the right to make their own decisions and must be assumed they have capacity unless otherwise proven
- An individual must be supported and given reasonable help to make own decisions before they are treated as unable to do so
- An individual must not be treated as lacking capacity simply because they make an unwise decision - can make crazy decisions!
- Everything done for someone who lacks capacity must be done in their best interest
- where decision made for another the ‘least restricitive option’ must be followed. The decision maker must make sure they interfere less with rights and freedom
mental capacity act 5 principles
Mental Capacity Act 2005
The Principles
Assumptions – One should never assume that someone lacks mental capacity.
Rights – One should take the least restrictive option with an individual who lacks mental capacity so that they maintain their basic human right of access to freedom.
Unwise decisions – An unwise decision does not constitute someone having lost their mental capacity.
Best interests – You must always act in the best interests of the individual.
Support – It is essential that a person who lacks mental capacity is given the necessary support they need to assist them with decision making.
Mental Capacity Act 2005
The Principles
Assumptions – One should never assume that someone lacks mental capacity.
Rights – One should take the least restrictive option with an individual who lacks mental capacity so that they maintain their basic human right of access to freedom.
Unwise decisions – An unwise decision does not constitute someone having lost their mental capacity.
Best interests – You must always act in the best interests of the individual.
Support – It is essential that a person who lacks mental capacity is given the necessary support they need to assist them with decision making.
How to determine if someone lacks mental capacity
The easiest way of remembering this is to think of the past, the present, and the future.
Does the individual have all of the information that they require in order to make the decision?
Does the individual understand why they need to make a decision?
Does the person understand the consequences of making the decision.
Can the person communicate clearly their decision?
what are the functions of the Office of Public Guardian
The OPG regulates and supervises Court appointed Deputies.
Its main functions include:
Registering LPAs
Keeping a record of court appointed deputies
Supervising deputies
Liaising with social services
Handling complaints
Provides reports the Court of Protection is it suspects that a Deputy is abusing his position.
How do you establish a Lasting Power of Attorney
For a Lasting Power of Attorney to be valid there are some requirements that must be adhered to:
The Donor or Attorney must be aged 18 or over
They must not be bankrupt
They must not lack mental capacity.
The LPA must be made in the prescribed form.
It must be signed by the donor.
It must be signed by an independent witness.
It must be signed by a certificate provider.
The Power of Attorney must not have been made under undue pressure and the Donor must have an understanding of the powers that they are giving away.
This must then be registered with the Office of the Public Guardian (OPG).
This will cost a fee of £82 per LPA (either Health and Welfare or Property and Financial Affairs).
The process can take 8-10 weeks.
They are not effective until registered.
Health and Welfare can not be used unless the Donor has lost mental capacity whereas the Property and Financial Affairs PoA can be used immediately.
duties of an attorney ?
Best Interests of the Donor must be adhered to.
Authority to make decisions must be established in the LPA. The Attorney does not have the authority to make decisions that are not prescribed.
Separation of the Donor’s funds and the Attorney’s funds is essential.
Interests, or conflicts of, should be avoided at all costs.
Consult with the Donor relating to decisions made on their behalf.
What is a Personal Representative
A person who has been issued with a grant to administer a deceased person’sestate. In practice, the term is commonly used in the broader sense of a person who is entitled to apply for a grant and administer the estate.
If there is awillthat names the personal representative, they are known as theexecutor(sometimes called anexecutrix, if a woman).
If there is no will (or if there is no executor named in the will, or if the executor is unable or unwilling to act), the Administration of Estates Act 1925 sets out who can apply to court to be the personal representative (usually a close relative of the deceased). The personal representative is in this case known as theadministrator.
What are the duties of a Personal Representative
Value the estate
Complete an IHT Account with HMRC (IHT100 form)
They pay outstanding tax
Outstanding liabilities such as a mortgage
They value any gifts made within the previous 7 years
They take account of any Gifts with Reservation that have been made.
They pay any IHT due on the estate
Then they apply for the Grant of Probate
This will then allow them to distribute the estate
Important Note
Inheritance tax is due 6 months after the month in which the Testator died.
Probate can not be granted, and the estate can not be administered until the value of the IHT liability has been paid in full.
The Trustee Act (2000)
It is important to distinguish the duties of a Trustee in general, and the duties of a Trustee when exercising their discretion over the investment of Trust property.
The overarching duty of a Trustee is to keep the Trust Deed safe.
A Trustee must use care, skill, and diligence when administering trust assets.
A Trustee must avoid conflicts of interest when performing trustee duties.
A Trustee must comply with the Trust Deed.
A Trustee must seek professional advice in relation to administering the Trust.
A Trustee must keep accounts of Trust assets and provide these to the Beneficiaries (if they are so entitled).
A Trustee must not benefit from the Beneficiaries of a Trust.
A Trustee must treat beneficiaries fairly and not exercise favouritism over any one beneficiary.
Trustees must act unanimously.
A Trustee must complete a tax return for the trust – Importantly, remember that all trustees are jointly and severally liable for the tax of the trust, however, it is only one trustee that is elected to deal with HMRC in relation to these matters.
A Trustee must ensure that the assets of the trust are controlled and insured.
Trustee Duties
Duty ofCare (4)
A Trustee must use care, skill, and diligence when administering trust assets.
A Trustee must avoid conflicts of interest when performing trustee duties.
A Trustee must comply with the Trust Deed.
A Trustee must seek professional advice in relation to administering the Trust.
A Trustee must keep accounts of Trust assets and provide these to the Beneficiaries (if they are so entitled).
A Trustee must not benefit from the Beneficiaries of a Trust.
A Trustee must treat beneficiaries fairly and not exercise favouritism over any one beneficiary.
Trustees must act unanimously.
A Trustee must complete a tax return for the trust – Importantly, remember that all trustees are jointly and severally liable for the tax of the trust, however, it is only one trustee that is elected to deal with HMRC in relation to these matters.
A Trustee must ensure that the assets of the trust are controlled and insured.
Trustee Duty - General power of investment
Section 3 – General Power of Investment
This subsection of the act stipulates that a trustee should act with the investment as if it were his own money, and as if he were absolutely entitled to the trust assets.
