Trusts

Question 1

Equitable vs beneficial interest

Answer 1

Beneficial = right to receive benefits or profits of a property, equitable = right to use and enjoy property (ie sub trust - equitable interest held by sub trustee and beneficial interest held by sub beneficiary

Question 2

Types of trust

Answer 2

express (intentional), resulting and constructive (arise by law)

Question 3

Trust v bailment

Answer 3

Bailor retains legal proprietary interest in bailed goods, has only granted possession vs beneficiary has equitable interest

Question 4

Trustee v agent

Answer 4

Trustee transact as principal for beneficiary, not as agent

Question 5

What type of interest does a full legal owner have

Answer 5

Legal interest only, no separate equitable interest

Question 6

Company transfers possession of its goods (not title) to a man, agree that man will try to sell the goods on behalf of the company and that he will return to the company any goods he is unable to sell. The man will pay the proceeds from any sales into a separate bank account and transfer the proceeds to the company. The man sells some of the goods. He pays the proceeds of the sale into a separate bank account. What is the man’s relationship with the company?

Answer 6

The man is a bailee (goods), an agent (authorised to sell goods on behalf of company), and a trustee for the company (paying proceeds to separate bank account that must transfer to company)

Question 7

Perpetuity - Rule against remoteness of vesting

Question 8

Perpetuity - Rule against alienability

Answer 8

1. Non-charitable purpose trusts only
2. = assets cannot be tied up on trust for longer than specific life + 21 years (21 years if no life specified)
3. (no wait and see) (common law rule)

Question 9

Perpetuity - Rule against remoteness of investing

Answer 9

1. Trusts with people or charities as objects
2. person/charity but obtain vested interest in trust property w/in perpetuity period = 125 years (trust can shorten)
3. wait and see = trust can exist until clear that cannot vest within perpetuity period
4. “class closing” rules can exclude objects that would otherwise cause trust to fail

Question 10

Trustee holds property on trust for A (age 2) for life, remainder to be divided equally btwn A’s children and grandchildren. Apply “class closing” rules

Answer 10

Problem: potentially violates perpetuity period, unclear how many years it will take for all grandchildren to be born. Solution: “class closing” - limits beneficiary to A’s children and grandchildren who are alive at the end of the perpetuity period

Question 11

Consequence of failing perpetuity period

Answer 11

Resulting trust for settlor

Question 12

Perpetuity: testator leaves £10k on trust in will, capital and income used to maintain grave of testator

Answer 12

Void because capital may not be used up within perpetuity period of 21 years (must contain express perpetuity clause)

Question 13

Perpetuity: testator leaves £10k on trust in will, income to be used to maintain grave of settlor

Answer 13

Void because capital will never be disposed of

Question 14

Perpetuity: testator leaves £10k on trust in will, capital and income used to maintain testator’s dog

Answer 14

Courts take restrictive approach, even though dog unlikely to live more than 21 years would be void

Question 15

Solutions to perpetuity - express clauses

Answer 15

1) “as long as the law allows” 2) express clause that trust lasts for 21 years 3) clause that perpetuity period only starts running at death of named person (“Royal lives clause” - “period not exceeding 21 years following the death of the last surviving descendent of Queen Elizabeth II who is alive at the date of my death”

Question 16

2 types of express trust

Answer 16

1) self-declared trust (settlor retains legal title and holds as trustee for third party) 2) transfer on trust (settlor transfers legal title to hold on trust for a beneficiary, includes transferring to third party to hold on trust for settlor)

Question 17

If express trust fails then

Answer 17

Resulting trust created

Question 18

Trusts by law

Answer 18

1) resulting trusts 2) constructive trusts 3) statutory trusts

Question 19

Three certainties

Answer 19

1) intention 2) subject matter 3) objects

Question 20

Consequence of uncertainty: inter vivos trusts - no transfer of legal title

Answer 20

no change, owner remains absolute legal owner

Question 21

Consequence of uncertainty: inter vivos trusts - transfer of legal title

Answer 21

1) if certainty of intention that trust fails and automatic resulting trust arises (ie uncertainty re: objects/subject matter) 2) if no certainty of intention then presumption of resulting trust applies

Question 22

Beneficiary principle

Answer 22

Trust only valid if has beneficiary (purpose = enforceability, holding trustee to account)

Question 23

Certainty: intention

Answer 23

1) = intention to assume responsibilities of trustees 2) ascertained from words/conduct, fact specific 3) use of word “trust” not necessary nor conclusive

Question 24

Certainty: subject matter

Answer 24

requires objective yardstick ie “reasonable income”

Question 25

Certainty - subject matter - tangibles

Answer 25

If no segregation then no valid trust (ie wine bottles)

Question 26

Certainty - subject matter - fungible intangibles

Answer 26

If no segregation valid (ie identical shares)

Question 27

Fixed trusts v discretionary trusts v powers of appointment

Answer 27

fixed trusts no discretion discretionary trusts has discretion but must exercise, powers of appointment may be exercised but need not be (but may need to consider using periodically if is a fiduciary power)

Question 28

Conceptual certainty

Answer 28

precision of language used by settlor to define class of persons intended as beneficiaries

Question 29

Evidential certainty

Answer 29

1) extent to which the evidence in a particular case enables trustees to identify the objects of the trust
3) Baden - C must prove to trustees’ satisfaction that they are within the class, else they are outside

Question 30

Test of certainty for fixed trusts

Answer 30

Complete list test = evidential and conceptual certainty

Question 31

Test of certainty of discretionary trusts and fiduciary powers

Answer 31

1. Is/is not test (any given postulate) = whether any given individual is or is not a member of the class
2. requires conceptual certainty but can accommodate some evidential uncertainty

Question 32

Administrative unworkability

Answer 32

Discretionary trust can fail but fiduciary power cannot

Question 33

Reason for certainty of objects

Answer 33

Court must be able to regulate and if necessary enforce trust

Question 34

Interested vested in possession

Answer 34

= current right to current enjoyment of property

Question 35

Interest vested in interest

Answer 35

= current right to future enjoyment of property (not contingent)

(ie, house held on trust for woman with life remainder to son)

Question 36

Contingent interest

Answer 36

right to property conditional on occurrence of uncertain future event

if future event occurs becomes “vested”

(ie trust of house for woman for life remainder to son if he survives her else charity)

Question 37

“gift-over”

Answer 37

= granting interest in property upon termination/failure of a prior interest

(ie trust of house for woman for life remainder to son if he survives her else charity)

Question 38

Sole beneficiary future interest to capital

Answer 38

capital interest carries intermediate income

(unless assigned to someone else)

(whether beneficiary will be paid income as arises depends on age of beneficiary + powers of trustees)

Question 38

Sole beneficiary absolutely entitled to capital and income

Answer 38

capital interest vested in possession

(if minor depends on dispositive powers of trustees ie power of maintenance)

Question 39

Successive interest trusts

Answer 39

1. property left to A for life (= life tenant/income beneficiary ) then B once A dies (= remainderman/capital beneficiary)
2. A only has interest in income, B only in capital when A dies

Question 40

Saunders v Vautier define

Answer 40

= sole adult beneficiary of sound mind w vested interest in trust property entitled to direct trustee to transfer legal title to them, end trust and become absolute owner

(must be absolutely entitled)

Question 41

Saunders v Vautier - fixed trusts

Answer 41

1) if each beneficiary has severable distinct interest the can exercise (ie simple fixed trusts with no successive interests)

2) else beneficiaries must agree to exercise rule to transfer agreed shares (together hold absolute interest)

(cannot agree if not adult of sound mind ie if child has successive interest must wait until turn 18)

Question 42

Saunders v Vautier - discretionary trust or fiduciary power with gift-over

Answer 42

1. exercisable if all agree (including those with contingent interests)
2. unlikely in large/complex trusts

Question 43

Formalities: trusts of land (s53(1)(b) LPA)

Answer 43

1. evidential requirement = trust unenforceable until satisfied
   (but trust exists from moment declared; once formalities satisfied beneficiary can enforce trust for period btwn declaration and satisfying formalities)
2. must just contain intention to create trust + terms
3. if will, must be validly executed

Question 44

Formalities for trust to land: consequences for self-declaration of trust

Answer 44

beneficiary cannot assert interest (unless PE or constructive trust)

Question 45

Formalities for trust to land: consequences for intended transfer on trust

Answer 45

1) if does not transfer legal title: void for lack of constitution and unenforceable unless estopped

2) if does transfer legal title, trustee should ask court

Question 46

Constitution define

Answer 46

= legal transfer of title from one party to another

Question 47

Constitution requirement for inter-vivos transfer trust/gift

Answer 47

Trust: legal title must transfer from settlor to trustee

Gift: legal title must transfer from donor to donee

Question 48

Constitution of self-declaration of trust

Answer 48

Automatically constituted when trust declared

Question 49

Transferring legal title of shares requirements

Answer 49

1) signed stock form 2) send to registrar of company

Question 50

Constitution of gifts and trusts in will

Answer 50

Constituted in will

Question 51

Constitution - multiple trustees

Answer 51

sufficient that trust property has been transferred to one of intended trustee, including where settlor is one

Question 51

Milroy v Lord Rule

Answer 51

If incorrectly tries to transfer legally title disposition fails,

equity will not assist volunteer

(will not treat as a self-declaration of trust)

Question 52

Fortuitous vesting (Strong v Bird rule)

Answer 52

= when imperfect gift but are later granted legal title through another route, equity will fix gift (ie will makes purported donee executor)

Requirements: 1) intention to make immediate gift 2) intention must continue until donor’s death 3) intended donee becomes executor (or one of several)

Question 53

Donationes Mortis Causa

Answer 53

1) = gift made in contemplation of death
2) conditions = 1) conditional on death 2) delivery of property (either handing it over or something that represents title

(1. re: chattel sufficient to have delivery w intention
2. re: land, shares, bank accounts more must be done to transfer title but full transfer not required (ie man dying tells friend house was hers and gives her keys to box that has title deeds))

Question 54

Professional negligence - Montgomery rule

Answer 54

Medical professionals have duty to tell patient is aware of any material risks re: any recommended treatment + any reasonable alternative

A material risk = reasonable person in the patient’s position consider as one or the doctor objectively should be (or is) aware that patent would consider material risk