Trusts

Question 1

Describe the three certainties required for the creation of a valid express trust.

Answer 1

The three certainties are certainty of intention, subject matter, and objects.

Question 2

Define fixed interest trusts and provide an example.

Answer 2

Fixed interest trusts involve the settlor specifying the share or interest each beneficiary is to take. Example: ‘£100,000 from my Halifax bank account to my children in equal shares’.

Question 3

Explain discretionary trusts and give an example.

Answer 3

Discretionary trusts give trustees the discretion to decide who shall benefit and in what shares within a stated class. Example: ‘£100,000 shall be distributed to such employees of X Ltd as my trustees decide’.

Question 4

How does uncertainty in subject matter affect the validity of a trust?

Answer 4

Uncertainty in subject matter can render a trust invalid as it must be identifiable for the trust to be valid.

Question 5

Describe the formality requirements for creating express trusts related to land.

Answer 5

For trusts related to land, the trust must be evidenced in writing and signed by someone able to declare a trust, as per s. 53 Land of Property Act 1925.

Question 6

Explain the ‘is or is not’ test in relation to certainty of objects in trusts.

Answer 6

The ‘is or is not’ test requires that beneficiaries must be clearly identifiable for a trust to be valid. It should be possible to determine if any person is or is not a beneficiary of the trust.

Question 7

Describe the constitution of express inter vivos trusts.

Answer 7

It involves the settlor doing everything necessary to transfer the property to the trustee.

Question 8

Define the rule in Strong v Bird (1874).

Answer 8

It allows for the completion of a gift if the intended donee becomes an executor before the gift is finalized.

Question 9

How does equity assist in the case of Donatio mortis causa?

Answer 9

It allows for inter vivos gifts made in anticipation of imminent death to become effective upon death.

Question 10

Do beneficiaries who have provided valuable consideration have the right to compel the settlor to constitute the trust?

Answer 10

Yes, they can compel the settlor if the trust is not completely constituted.

Question 11

Describe the difference between fixed and discretionary interests in trusts.

Answer 11

Fixed interest means the beneficiary has a certain interest, while discretionary interest depends on the trustee’s discretion.

Question 12

Explain the difference between vested and contingent interests in trusts.

Answer 12

Vested interest means the beneficiary has a definite interest, while contingent interest is subject to an event occurring.

Question 13

Describe the rule in Saunders v Vautier.

Answer 13

The rule allows beneficiaries to end a trust if they are of age and mentally capable.

Question 14

Define charitable trusts and provide examples of charitable purposes.

Answer 14

Charitable trusts are for public benefit and can include purposes like education, health, and environmental protection.

Question 15

Explain non-charitable purpose trusts and give examples of valid purposes.

Answer 15

Non-charitable purpose trusts do not benefit the public and can include trusts for animals, monuments, or private masses.

Question 16

How do resulting trusts arise and when are they presumed?

Answer 16

Resulting trusts can arise automatically when a trust fails, or they can be presumed by the court based on certain circumstances.

Question 17

What is the distinction between automatic resulting trusts and presumed resulting trusts?

Answer 17

Automatic resulting trusts arise when a trust fails, while presumed resulting trusts are implied by the court based on specific presumptions.

Question 18

Describe the principle behind beneficiaries being considered equitable owners of their specified interest in a trust.

Answer 18

Beneficiaries are entitled to their share of the trust property and can call for the trust to be ended if they are of age and mentally capable.

Question 19

Describe the presumption of advancement in property transfers.

Answer 19

It presumes that a transferor did not intend to make a gift unless there is clear intention or a special relationship exists, which can be rebutted by evidence.

Question 20

Define common intention constructive trust in relation to trusts of the family home.

Answer 20

It refers to the establishment of equitable ownership based on express declarations or agreements, even if legal title is registered differently.

Question 21

How can verbal declarations contribute to the creation of a trust, as seen in Rowe v Prance [1999]?

Answer 21

Verbal declarations can express the intention to create a trust, as evidenced in the case where referring to ‘our yacht’ led to the acquisition of a beneficial interest.

Question 22

Do direct contributions play a role in establishing common intention constructive trusts?

Answer 22

Yes, contributions to the purchase price can infer a share in the property, indicating a common intention to own the property together.

Question 23

Describe the requirements to establish proprietary estoppel.

Answer 23

It requires assurance giving rise to an expectation, reliance on the assurance, and acting to detriment as a result of the assurance.

Question 24

How can liability of strangers to the trust be established in cases of property breaches?

Answer 24

By showing that the person knowingly receiving property from a breach of trust is liable and must return the property, following specific requirements and remedies.

Question 25

Describe the requirements for establishing accessory liability a breach of trust scenario.

Answer 25

The requirements include the existence of a trust, a breach of trust or fiduciary duty, the third party’s involvement in the breach, and the third party acting dishonestly.

Question 26

Define the duty of a fiduciary not to profit from their position.

Answer 26

It prohibits fiduciaries from obtaining benefits or exploiting opportunities by virtue of their position, unless consent is given by the principal.

Question 27

How is liability typically treated in cases of breach of trust by a fiduciary?

Answer 27

Liability is strict, and the trustee must account for any profits to the principal.

Question 28

Describe the rule that prohibits a fiduciary from purchasing trust property.

Answer 28

The rule states that a fiduciary cannot deal on behalf of themselves and the principal in the same transaction, such as buying trust property.

Question 29

Define the principle that a fiduciary should not put themselves in a conflicting position of interest and duty.

Answer 29

It means that a fiduciary should not engage in transactions where their personal interest conflicts with their duty to protect the interests of those they are bound to.

Question 30

How are trustees appointed and removed in a trust scenario?

Answer 30

New trustees can be appointed through various means, such as by the testator in the will, and the trust property needs to be vested in them usually by a deed of appointment.

Question 31

Describe the different ways in which new trustees can be appointed in a trust.

Answer 31

New trustees can be appointed by the settlor, a person with an express power to appoint trustees, surviving or continuing trustees, the court under statutory provision, or beneficiaries under specific circumstances.

Question 32

Define the process of removal of trustees in a trust.

Answer 32

Trustees can be removed through disclaimer, where the trustee refuses or is unfit to act, or under an express power granted in the trust instrument.

Question 33

How can new trustees be appointed by the court under statutory provision?

Answer 33

The court may appoint new trustees when it is deemed necessary and impracticable to do so without court assistance, either in substitution for existing trustees or in addition to them.

Question 34

Describe the circumstances under which beneficiaries can appoint new trustees in a trust.

Answer 34

Beneficiaries can appoint new trustees when there is no nominated person in the trust instrument, and the beneficiaries are of full age, capacity, and absolutely entitled to the trust property.

Question 35

Do trustees have the option to disclaim trusteeship?

Answer 35

Yes, trustees can disclaim trusteeship if they find it onerous or unpaid, and this disclaimer should be done before undertaking trusteeship.

Question 36

Define the process of removal of trustees through disclaimer.

Answer 36

Trustees can be removed through disclaimer, where they explicitly or implicitly refuse or disclaim their role as trustees before undertaking any trusteeship responsibilities.

Question 37

Describe the methods through which trustees can retire from their position.

Answer 37

Trustees can retire by exercising provisions in the trust instrument, being replaced according to the Trustee Act 1925, utilizing the statutory power in the Trustee Act 1925, with beneficiary consent, by beneficiary direction under the TOLATA 1996, or through a court order under the Trustee Act 1925.

Question 38

Define the common law duty of care expected from trustees.

Answer 38

Trustees are required to exercise the same diligence and care as an ordinary prudent person in business would with their own affairs.

Question 39

How can trustees exclude the statutory duty of care from the trust instrument?

Answer 39

Trustees can exclude the statutory duty of care by including a provision to that effect in the trust instrument.

Question 40

Describe the duty of trustees in relation to investment.

Answer 40

Trustees must ensure the trust produces interest and profit where applicable, maintain impartiality between beneficiaries, maintain a fair balance between beneficiaries, obtain proper advice, obtain the best price, and review investments periodically.

Question 41

What is the power of maintenance under the Trustee Act 1925?

Answer 41

The power of maintenance allows trustees to advance income for the maintenance, education, and benefit of beneficiaries, particularly minors.

Question 42

Define breach of trust and provide an example of it.

Answer 42

Breach of trust is the violation of any duty a trustee owes to the beneficiaries. An example is trustees taking actions beyond their authority, leading to liability for breach of trust.

Question 43

Describe examples of actions that can lead to liability for trustees in a trust.

Answer 43

Misapplication of trust property, unauthorized investments, conflicts of interest, inadequate actions like poor investments or breach of duty of care.

Question 44

What is the measure of liability for trustees in a trust?

Answer 44

Personal liability, joint and several liability, contribution among trustees, and indemnity for full liability.

Question 45

How can trustees be protected from liability in a trust?

Answer 45

Through exemption clauses in the trust instrument, relief of liability by court under S 61 Trustee Act 1925, and limitation periods.

Question 46

Define the nature of equitable remedies in equity.

Answer 46

Equitable remedies supplement common law, are broad and flexible, not limited by causation, require fairness, clean hands, and may be excluded by agreement.

Question 47

What are some types of equitable remedies available in equity?

Answer 47

Specific performance, injunctions, and equitable damages for breach of contract.

Question 48

How does tracing work in equity compared to common law?

Answer 48

In equity, tracing can help recover misappropriated property even if converted or mixed with other assets, unlike in common law where such tracing may be challenging.

Question 49

Describe the requirements for tracing at common law.

Answer 49

The substitute must be a clean substitute and not mixed with other property.

Question 50

What are the conditions for tracing in equity to be possible?

Answer 50

Pre-existing fiduciary relationship, property in traceable form, and it is equitable to trace.

Question 51

Explain the principle of mixing with a fiduciary’s money and how tracing is affected.

Answer 51

Presumption that fiduciary spent own money first; claimant can trace the remainder. If money was invested wisely, claimant may trace into the investment.

Question 52

How does the concept of lowest intermediate balance apply in tracing with a fiduciary’s money?

Answer 52

Claimant cannot trace into later deposited money; maximum claimable amount is the lowest intermediate balance following the original deposit.

Question 53

What is the ‘first in-first out’ principle in the context of mixing with an innocent party’s money?

Answer 53

The presumption that money paid in first was paid out first when multiple innocent parties’ money was mixed and spent.

Question 54

Define the potential liability of a third party who is not innocent in a situation involving mixing of funds.

Answer 54

The third party may be subject to liability as well.

Question 55

How can a claimant trace property in equity through substituted/mixed property or electronic fund transfers?

Answer 55

By identifying the asset owned and following the principles of tracing in equity.

Question 56

Explain the significance of a pre-existing fiduciary relationship in the context of tracing property.

Answer 56

It is a necessary condition for tracing in equity to be possible.