Trusts Flashcards
A woman recently died. Her valid will contains the following clauses:
‘1. I give £10,000 to my trustees to be distributed amongst my children in such shares as my trustees shall determine.
I give £10,000 to my trustees to pay an ample sum to my brother.’
Which statement best describes the status of the trusts in clauses 1 and 2?
a. The trustees can determine whether the trusts are valid or void.
b. The trusts in clauses 1 and 2 are void.
c. The trusts in clauses 1 and 2 are valid.
d. The trust in clause 1 is valid but the trust in clause 2 is void.
e. The trust in clause 2 is valid but the trust in clause 1 is void.
d. The trust in clause 1 is valid but the trust in clause 2 is void.
Certainty of subject matter comprises two requirements. The second requirement is the beneficial entitlement requirement: it must be possible to ascertain the nature and extent of the beneficiary’s interest in the trust property. In relation to clause 1, it is possible to ascertain the extent of each beneficiary’s interest by reference to the trustees’ determination. However, in relation to clause 2, it is not possible to ascertain the extent of each beneficiary’s interest because ‘ample sum’ is an uncertain measure. (How much is an ‘ample sum’?) As a result, the trust in clause 2 is void for uncertainty of subject matter.
A woman declares a trust of three of her five paintings, and 100 of her 200 ordinary shares in a private company, in favour of a man. The woman does not segregate or otherwise identify the three paintings or the 100 shares to be held on trust.
Which statement best describes the effect of the woman’s declaration?
a. The woman does not hold any shares or paintings on trust for the man. She remains the full legal owner of all the shares and paintings.
b. The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
c. The woman holds three paintings on trust for the man. She remains the full legal owner of the other two paintings and all the shares.
d. The woman holds 100 shares on trust for the beneficiary. She remains the full legal owner of the other 100 shares. She holds the paintings on a resulting trust for herself.
e. The woman holds 100 shares and three paintings on trust for the man. She remains the full legal owner of the other 100 shares and two paintings.
b. The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
Certainty of subject matter comprises two requirements. The first requirement is the trust property requirement: it must be possible to identify the trust property. The woman has failed to identify the three paintings to be held on trust and, as a result, it is not possible to identify the trust property. By contrast, the woman’s failure to identify the 100 shares to be held on trust is not fatal because a person can declare a valid trust of x of their (x+y) shares of the same type in the same company without identifying the x shares to be held on trust.
A woman recently died. Her valid will contains the following clause:
‘I give £10,000 to my husband absolutely. I trust him to use it fairly vis-à-vis our children.’
The executor of the woman’s will has paid £10,000 to her husband.
Which statement best describes the husband’s position in relation to the £10,000?
a. The husband holds the money on a discretionary trust for the children.
b. The husband holds the money on a fixed trust for himself and the children.
c. The clause is void and the husband receives nothing.
d. The husband holds the money on a fixed trust for the children.
e. The husband is the full legal owner of the money.
e. The husband is the full legal owner of the money.
The £10,000 is given to the husband ‘absolutely,’ which is consistent with a gift. The words ‘I trust him to’ are not sufficiently imperative to impose a duty (a trust) in relation to the money. This is supported by the fact that the content of any supposed duty – the ‘fair’ use of the money – is entirely vague.
A company transfers possession of its goods, but not its title to them, to a man. The company and the man agree that the man will try to sell the goods on behalf of the company and that he will return to the company any goods that he is unable to sell. They also agree that the man will pay the proceeds from any sales into a separate bank account and that he will transfer the sum credited to that account to the company at the end of each week. The man sells some of the goods. He pays the proceeds of sale into a separate bank account.
Which statement best describes the man’s relationship with the company?
a. The man’s relationship with the company is not fiduciary in nature: it is merely contractual.
b. The man is a bailee for the company.
c. The man is a bailee, an agent and a trustee for the company.
d. The man is an agent for the company.
e. The man is a trustee for the company.
c. The man is a bailee, an agent and a trustee for the company.
The man has possession of (but not title to) the company’s goods. This creates the relation of bailor and bailee. The man is authorised to sell goods on behalf of the company. This creates the relation of principal and agent. The man has paid the proceeds of sales into a separate bank account, which he must transfer to the company. This creates the relation of trustee and beneficiary.
A testator’s validly executed will contains the following clause:
“My trustees shall hold my engagement ring and my wedding ring on trust until my daughter reaches the age of 21. She may then choose one of the rings for herself. After my daughter makes her choice, my trustees shall give the other ring to my niece.”
The testator’s daughter dies before reaching the age of 21. The niece is still alive.
Which one of the following statements is the best advice to the trustees as to the niece’s entitlement to a ring under the testator’s will?
a. The niece is entitled to both rings.
b. The niece is entitled to a ring chosen by the court.
c. The niece is not entitled to either ring.
d. The niece is entitled to the ring of her choice.
e. The niece is entitled to a ring chosen by the trustees.
c. The niece is not entitled to either ring.
The intended trust fails for uncertainty of subject matter, specifically beneficial entitlement as in the case of Boyce v Boyce. There was a mechanism for determining beneficial entitlement but that mechanism can no longer be used because the daughter died without making her choice.
A settlement contains a discretionary trust and a fiduciary power. The objects of the discretionary trust are ‘all children living in the United Kingdom.’ The objects of the fiduciary power are ‘all adults living in the United Kingdom.’
Which statement best describes the status of the trust and the power?
a. The power is valid but the trust is void.
b. The trust and the power are valid.
c. The trust and the power are void.
d. The trustees can determine whether the trust and the power are valid.
e. The trust is valid but the power is void.
