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SQE1 FLK 2 > Trusts > Flashcards

Trusts Flashcards

1
Q

Who has legal ownership over trust property?

A

Trustee

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2
Q

Who has beneficial interest under a trust?

A

Beneficiary

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3
Q

What is an express trust?

A

A trust somebody purposefully created

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4
Q

What is a testamentary trust?

A

One set up in a will

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5
Q

What is an intervivos tryst?

A

The settlor still retains benefits of the assets in the trust during their lifetime

Either they are also a beneficiary or they are the trustee of their own trust

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6
Q

What is a fixed trust?

A

Distribution is decided and laid out by the trustee already

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7
Q

What is a discretionary trust?

A

Trustee can decide how to distribute the property

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8
Q

What is a charitable purpose trust?

A

Created for the public benefit

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9
Q

What is a non-charitable purpose trust?

A

Usually some sort of charitable endeavour that doesn’t fall into the definition of charitable trust

E.G., looking after an animal after you have died

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10
Q

What is a bare trust?

A

Trustee holds legal title for the beneficiary but has now power and MUST follow the instructions of the beneficiary

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11
Q

What is the perpetuity rule?

A

Prevents trusts lasting longer than 125 years

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12
Q

What is an implied trust otherwise known as?

A

Trusts arising by operation of law

Resulting/constructive

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13
Q

What are the 2 methods of creating express trusts?

A

Self-declaration

Transfer on trust

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14
Q

What happens in terms of ownership when you make a self-declaration of trust?

A

Settlor retains legal title

New equitable title is created

Beneficial ownership transfers to the beneficiary

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15
Q

What happens ownership-wise when you make an express trust via transfer on trust?

A

Settlor transfers legal title to third party

Settlor ceases to have any interest

New equitable title is created

Beneficial ownership is transferred to the beneficiary

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16
Q

What are the 3 certainties?

A

Intention

Subject Matter

Objects

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17
Q

What are the requirements for creation of express trusts

A

Certainty of intention

Beneficiary principle

Perpetuity rules

Registration – Online Trusts Registration Service (TRS)

Formalities
- Declaration of trust
- Constitution of trusts

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18
Q

What is the beneficiary principle?

A

Objects of trust must be legal persons (incl. companies)

*Without identifiable objects or beneficiaries, there is nobody who can enforce the trust

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19
Q

What are the 2 exceptions to the beneficiary principle?

A

Charitable and Non-Charitable

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20
Q

Which type of trust is exempt from the perpetuity rules?

A

Charitable

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21
Q

What are the 3 types of implied trust?

A

Constructive

Resulting

Statutory

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21
Q

What is the difference in formalities between a self-declaration express trust and a transfer on trust?

A

Declaration: only have to consider whether there are any obligations for that type of trust, e.g., in writing

Transfer: only comes into existence when the property is actual transferred into the trustees name (also called constitution)

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22
Q

What 2 types of resulting trusts are there?

A

Automatic resulting

Presumed resulting

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23
Q

What 3 types of constructive trusts are there?

A

Institutional

As remedy

Common intention

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24
Q

When do automatic trusts arise?

A

When transfer on trust fails wholly or partly (e.g., failed for certainty)

E.G.,

Trustee is holding property on trust for the settlor

*Settlor has Saunders v Vautier rights

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25
Q

When does a presumed resulting trust arise?

A

When someone makes a “gift”, equity presumes they wanted that person to hold it on trust for them

Raises a rebuttable presumption

Must be evidence that it was intended to be a gift

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26
Q

What is an institutional constructive trust?

A

Arises when the conscience of a legal owner is effected in some way, preventing them from denying the beneficial interests of another person

e.g., prevent fraud, breach of fiduciary duty

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27
Q

In what 4 circumstances can institutional constructive trusts arise?

A

Prevent fraud

To perfect an imperfect gift or trust

To compel parties to perform a contract

Over profits made in breach of fiduciary duty

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28
Q

What is a constructive trust ‘as remedy’

A

A trust that is awarded by the court as a remedy to misapplication of property where the claimant can establish an equitable proprietary interest OR traceable proceeds

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29
Q

What is a common intention constructive trust?

A

Court assesses peoples common intention with a piece of property and uses that to assess their respective equitable interest in the land

(Often unmarried couples who own a house together and are splitting up)

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30
Q

What happens if trust property is destroyed?

A

Trust ceases to exist unless the trustee is at fault in which case they have to restore property

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31
Q

What is a quistclose trust?

A

A trust that arises when property has been transferred for a specified purpose but that purpose then fails.

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32
Q

What is the difference in the proprietary rights beneficiaries have of fixed trusts, and discretionary trusts?

A

Fixed:
- Equitable proprietary rights (vested/contingent)
- Can sell/transfer/assert rights against 3rd parties

Discretionary:
No proprietary rights technically
Can compel misapplied property to be returned

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33
Q

Do both fixed and discretionary trust beneficiaries have saunders/vautier rights?

A

Yes

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34
Q

What personal rights do objects of fixed trusts have?

A

Compel proper administration

To be informed of their entitlement once their interest has vested

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35
Q

What personal rights do discretionary objects have?

A

Ask court to ensure discretion is exercised

Be informed of entitlement, after discretion has been exercised for at least 1 object

Enforce proper administration of trust against the trustee

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36
Q

What is the definition of a successive interest trust?

A

A series of consecutive interests in trust property

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37
Q

What is a life-interest trust?

A

Type of successive interest

Object 1 gets income in lifetime
Object 2 gets capital after income object dies

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38
Q

MUST or MAY discretionary trustees exercise their discretion?

A

MUST

*in reasonable time

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39
Q

What is a power of appointment?

A

A right to choose who, from within a specified class of objects, receives property

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40
Q

Who is the donor? (power of appointment)

A

Person who confers the power

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41
Q

Who is the donee? (power of apt)

A

Person who receives the power

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42
Q

What is a fiduciary power of appointment?

A

Power of appointment given to a trustee

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43
Q

What obligations does a person with fiduciary power of appointment have?

A

Doesn’t need to exercise power but must periodically consider whether to do so

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44
Q

What is a personal power of appointment?

A

Power of apt given to somebody who isn’t a trustee

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45
Q

What obligations does a person with personal power of appointment have?

A

None, they don’t even have to consider exercising it

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46
Q

What 3 key features distinguish between a power of appointment and a discretionary trust?

A

WORDING:
MUST = discretionary
MAY = POA

POWER HOLDER IDENTITY
3rd party (not trustee) = POA

GIFT-OVER
= POA (because it means power doesn’t have to be exercised) (NOT DETERMINATIVE)

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46
Q

What does vested in interest mean?

A

Future right to enjoyment

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46
Q

What does vested in possession mean?

A

Current right to enjoyment

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46
Q

Who can trust property be transferred to under saunders/vautier?

A

Beneficiaries

3rd parties

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46
Q

Who can exercise saunders/vautier rights?

A

Adults

Sound mind

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46
Q

What is a contingent interest?

A

Conditional interest upon the occurrence of an event

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47
Q

How can saunders/vautier be exercised in a simple fixed trust?

A

Each beneficiary severs their share off capital without affecting the interests of others

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48
Q

How can saunders/vautier be exercised for complex trusts where shares are not severable?

A

All beneficiaries must be adults of sound mind

Unanimously agree to collapse

Includes beneficiaries with contingent interests and objects of discretionary trusts

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49
Q

What is the intention behind certainty of intention?

A

To impost or assume a duty which is characteristic of a trust

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50
Q

How is intention ascertained for certainty of intention?

A

Words and conduct

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51
Q

Will the court adopt an objective or subjective approach to certainty of intention?

A

Objective

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52
Q

What factors can be looked at when interpreting certainty of intention from written documents?

A

Natural and ordinary meaning

Relevant/contextual features

Facts known by the author when created

Common sense

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53
Q

How is use of the word ‘trust’ analysed when looking for certainty of intention?

A

Good indicator

Not determinative

Not necessary

54
Q

What are the 2 requirements under certainty of subject matter?

A

Possible to identify trust property

Possible to ascertain beneficiary interest in the trust property

55
Q

What is the difference between fungible and non-fungible assets?

A

Fungible = exchangeable (identical)

Non-fungible = aren’t EXACTLY the same, cannot be exchanged

56
Q

For what types of asset, can you declare a trust over a specified number of things in a wider bulk, without specifying exactly which items those are? (e.g., 10 of x in my collection)

A

Intangible, fungible assets

E.G., ordinary shares

57
Q

What is the difference between tangible and intangible assets?

A

Tangible = physical things: cash, diamonds

Intangible = conceptual things: shares, debts, property rights

58
Q

Will a trust be void for certainty of subject matter if it says ‘reasonable income?’

A

No

59
Q

What test do you use to determine certainty of objects in fixed trusts?

A

Complete list test

(must have conceptual and evidential certainty)

60
Q

What test do you use to determine certainty of objects for discretionary trusts and fiduciary powers?

A

is/is not test

(must have conceptual certainty but can accommodate some evidential uncertainty)

61
Q

What fails for administrative unworkability?

A

Discretionary trusts

NOT

Fiduciary power

62
Q

What is conceptual certainty?

A

Linguistic certainty

Precision of language in defining a class

63
Q

What is evidential certainty?

A

Extent to which evidence in a case enables trustees to identify the objects of the trust

64
Q

Must a POA also satisfy certainty of objects to be valid?

A

Yes

65
Q

Why do discretionary trusts fail for administrative unworkability?

A

Because the class of objects is so large that it can’t really be a class

66
Q

What is the difference between ‘half the bottles in my wine cellar’ and 50% of the wine in my cellar?

A

Half the bottles isn’t possible because which half? Maybe some are corked? Some are worth more money?

50% gives an interest in all of the bottles so it is valid

67
Q

What formalities should you consider for an inter vivos trust?

A

Is subject matter land? – must consider requirements under s53(1)b LPA 1925

Other: can be orally, in writing or conduct

68
Q

What is the consequence for a failed declaration of an inter vivos trust of land?

A

The trust won’t be enforceable

69
Q

What is the consequence of a failed self-declaration of trust?

A

Will have no effect

70
Q

What is meant by constituting a trust?

A

Transferring the property to the trustee

71
Q

What is the rule in Milroy and Lord?

A

Equity will not perfect an imperfect gift

  1. Will not treat an intended gift as a self-declaration of trust
  2. Will not treat a failure to constitute a trust as a self-declaration of trust
72
Q

What is the formalities for declaring a trust of land under s53 of the LPA?

A

In writing

By person or by will

73
Q

What are the exceptions to Milroy/Lord?

A

Re: Rose

Unconscionable principle

Strong v Bird

Donatio Mortis Causa

74
Q

What is the re:rose exception to milroy v lord (that equity will not perfect and imperfect gift?

A

Correct method

Transferor did everything in their power

Or put it beyond their own control

IF SO: equity will impose a constructive trust for the transferee

75
Q

What is the unconscionable principle for equity perfecting a gift?

A

Court will do it if unconscionable

Look for: if a transferor died, and the transferee was appointed as PR – apply Strong v Bird

76
Q

What is the Strong v Bird exception to Milroy v Lord?

A

Intention to create an immediate gift

Intention continues until death

Transferee is a PR

(when the property is transferred to the PR, it ‘perfects’ the gift)

77
Q

What is the donatio mortis cause exception to Milroy v Lord?

A

Intended to make a conditional gift on death (not immediate gift like for Strongbird)

In contemplation of death (of a specific cause)

Actual/constructive delivery of the property

78
Q

What are the 3 conditions for a purpose trust?

A

Charitable purpose

Public benefit

Wholly and exclusively charitable

79
Q

What are the 3 types of non-charitable purpose trusts?

A

Endacott

Closed class

Narrowly construed

80
Q

What are the 12(13) recognised types of charitable trust?

A

Poverty

Education

Religion

Health/save lives

Advance citizenship/community development

Art, culture, heritage, science

Amateur sport

Human rights, conflict, equality, diversity, harmony

Environment

Youth, age, ill-health, disability, financial hardship and other disadvantages

Animal wellfare

Armed forces, police, fire, rescue, ambulance

General purpose/catchall

81
Q

What are the 2 most important considerations when looking at whether a charitable purpose trust is for public benefit?

A

Can’t exclude the poor

Can’t be limited to a narrow class of private individuals

82
Q

Can charitable purpose trusts have a mix of charitable and non-charitable purposes?

A

No, unless the non-charitable portion is ancillary to the charitable purpose

83
Q

What happens if a charitable purpose trust is failed to be created properly?

A

Cy-pres

84
Q

What happens if a non-charitable purpose trust is failed to be created correctly?

A

Resulting trust

85
Q

What is the difference between establishing certainty for a charitable vs non-charitable trust?

A

Non-charitable will fail for certainty, like all other trusts

Charitable does not have to be certain… just needs to be clear that there is charitable INTENT, in which case the trustee can decide what charity to donate to etc

86
Q

What is the cy-pres doctrine?

A

If there is a failed charitable trust, then the property can be applied to a different charitable purpose

87
Q

What is the perpetuity rule for charitable trusts?

A

Statutory

Trust property must vest in the charity within 125 years

OR if a gift to charity:

Within 125 years of giving that gift

88
Q

Can charitable purpose trusts continue indefinitely?

A

Yes

89
Q

What is perpetuity for non-charitable purpose trusts?

A

Must be limited to 21 years, and this can be extended to life in being (e.g., life of the king)

90
Q

What is the difference between enforceability of charitable purpose vs non-charitable purpose trusts?

A

Charitable: enforceable by the charity commission

Non-charitable: not enforceable, trustees are usually required to give an undertaking, if they don’t comply then the residual beneficiaries under the will get the property

91
Q

What are the differences that apply to charitable trusts vs all other trusts?

A
  1. Don’t have to comply with beneficiary principle
  2. Flexible certainty of objects (only needs to certainly be for charity)
  3. No limit on duration
  4. Cy-pres doctrine
  5. Tax benefits
92
Q

What is the test to decide whether a charitable trust is for public benefit?

A

Beneficiaries cannot be negligible in number

Quality distinguishing them from others cannot be a quality that depends on their relationship with another individual

93
Q

What type of charitable cause will never be eligible as a charitable trust?

A

Political

94
Q

What 4 types of charitable purpose trust have slightly different public benefit rules?

A

Poverty

Education

Religion

Human rights

95
Q

How is a charitable trust for poverty different in terms of public benefit test?

A

Class can be defined by reference to a particular person

BUT

Benefit must still be for a particular description of poor persons, not particular poor persons

96
Q

How is a charitable trust for education different in terms of public benefit test?

A

Fee paying schools aren’t for public benefit but they are still a charitable purpose as long as they have some token of accessibility for the poor

97
Q

How is a charitable trust for religion different in terms of public benefit test?

A

Public benefit must be proved in each case

E.G., to specific nuns in a house won’t count despite it being religious but to a synagogue benefitting wide community would

98
Q

How is a charitable trust for human rights different in terms of public benefit test?

A

It walks the line with

Trust for political objectives (is not valid)

VS

Trust doing political activity as a means to achieving a charitable end (is valid)

99
Q

On what 5 grounds can the cypres doctrine to apply?

A

OG purpose cannot be fulfilled/carried out

OG funds are not spend (SURPLUS)

Property from similar trusts can be combined for more effective use

Area/class of persons no longer exists/is suitable

Purpose has been:
- adequately provided for by other means
- ceased to be charitable in law
- ceased to provide suitable/effective method of using the property

100
Q

What are the endacott exceptions for non-charitable purpose trusts?

A

Maintenance of particular animals

Monuments and graves

Private masses

101
Q

How do class closing rules work?

A

If the class isn’t certain, it will close at the end of the perpetuity period

102
Q

Do resulting trusts apply to family homes?

A

No

103
Q

What does an automatic resulting trust arise?

A

Failure to create valid trust or partial failure

104
Q

When do presumed resulting trusts arise?

A

Gratuitous transfers

Person pays all/part of purchase price (NOT family home)

105
Q

What trust creation failures don’t lead to resulting trusts?

A

Trust fails due to lack of constitution (settlor always had, and still has the property)

106
Q

What are the 2 most common instances of partial trust failures leading to automatic resulting trusts?

A

Failure to vest within 125 years and no gift over

Purpose of non-charitable purpose can no longer be carried out (pet died)

107
Q

What is the presumption of advancement?

A

Where a resulting trust does not arise because of a relationship between the transferor and transferee

It gives rise instead to the presumption of advancement

Means that the transfer was intended as a gift

108
Q

In what 3 circumstances is there a presumption of advancement?

A

From husband to wife (and fiances) (BUT ONLY THE MAN TO THE WOMAN)

Parent to child (INCL. ADULT CHILD)

Person in loco parentis to a minor child

109
Q

What is the starting point in family homes cases?

A

Equitable title reflects legal title

110
Q

Where there is sole legal ownership, what does a person have to prove to establish a claim in a family home?

A

That they acquired an intention under a common intention constructive trust

  1. There was common intention for family home
  2. They detrimentally relief on it
111
Q

In joint legal ownership cases, somebody trying to establish that somebody else doesn’t have an interest in the family home has to prove what?

A

Rebut the presumption of joint equitable ownership by showing

  1. Intention was to own separately
  2. Detrimental reliance on that fact
112
Q

What does the statement ‘intention can be ambulatory’ mean?

A

Circumstances change… beneficial interest in a family home can be established after acquisition etc

113
Q

What is the courts approach to quantifying equitable interest once interest in a family home has been established?

A

Whole course of conduct

114
Q

What is proprietary estoppel?

A

Whereby a claimant informally acquires property rights

115
Q

What are the 3 elements to a proprietary estoppel claim?

A

Assurance was made

Relied on

Detrimentally

Is unconscionable

116
Q

What characteristics must an assurance have to satisfy proprietary estoppel?

A

A right in or over an identified property

117
Q

What is the test for reliance in proprietary estoppel claims?

A

There is a sufficient link between the defendants assurance and the claimants detrimental conduct

118
Q

How does the court approach assessing detriment for the purposes of proprietary estoppel?

A

Very widely

119
Q

What is the test for unconscionability in proprietary estoppel claims?

A

Shock the court

**very rarely are cases thrown out for this. Court is easily shocked.

120
Q

What are the Guest Guidelines for remedies available for proprietary estoppel?

A

Remedy does not exceed expectation

Satisfying the expectation is usually most fair way of resolving the unconscionable thing

If not possible/satisfactory, monetary equivalent of what claimant was promised

If more than 1 remedy exists, claimant can choose

121
Q

Can all trustees be paid?

A

Only professionals

122
Q

How many trustees should you have?

A

Best is at least 2

Usually max 4

123
Q

What is the irreducible core of trustee duties?

A

Act honestly and in good faith for the benefits of the beneficiaries

124
Q

What happens if the trustee chosen in a self-declared trust?

A

Trust instrument could contain an express power

If not, or cannot be exercised, the disclaiming trustee can appoint their replacement

125
Q

What happens in a testamentary trust, if somebody won’t/can’t act as trustee?

A

Renouncers can appoint new trustees of their choice

Deceased 3rd party then the PR’s temporarily become trustees and then they have the power of appointment

Disclaiming trustee refusing to appoint: PR’s can choose

126
Q

Does a living settlor have power to name replacement trustees?

A

No

127
Q

In what 5 ways can new trustees of already existing trusts be appointed?

A

Express powers in instrument

Current or outgoing trustees rely on their statutory power to appoint

Beneficiaries, using Saunders/Vautier to give title over to new trustee

By Charity Commission (for charitable trusts only)

By court

128
Q

What is the key operational difference between trustee powers and trustee duties?

A

Powers are permissive MAY

Duties are mandatory MUST

129
Q

From what sources do trustee powers come from?

A

Trust instrument

Statute (TA 1925, TA 2000)

130
Q

What are the 2 broad categories of trustee powers/duties?

A

Administrative (management and protection of trust property)

Dispositive (giving property to objects)

131
Q

What is the difference between breaching a fiduciary duty and other duties?

A

It is a different cause of action, with different remedies

132
Q

What are the 3 main statutory powers set out in TA 2000?

A

Investment

Acquire land

Delegation

133
Q

What must a trustee consider before exercising their power of investment?

A

Consider the investment criteria in TA 2OOO

Take advice in accordance with TA 2000

134
Q

Can DOC be excluded with regards to power of investment?

A

Yes, in the trust instrument

135
Q

What are the standard investment criteria under TA 2000?

A

Suitability
1. Is the investment of a suitable kind? (land)
2. Is this particular investment suitable? (that piece of land)

Diversification

136
Q

What principles are there for suitable investments a trustee can make?

A

Best interest of beneficiaries

Balance interests of beneficiaries

Personal views of trustees are not relevant

Best interests can be wide, and include moral/ethical conundrums with certain investments if all beneficiaries agree

Trusts are not bound to follow investment advice, but they can’t ignore it because they personally disagree

137
Q

What is ‘proper advice’ for a trustee exercising the power of investment?

A

Provided by a person who is reasonably believed by the trustee to be qualified to give it

138
Q

To what circumstances the statutory DOC apply to trustees?

A

Only to the statutory duties in TA 2000

139
Q

What is the statutory duty of care in TA 2000?

A

Reasonable care and skill
- special knowledge/experience
- professional trustees

140
Q

What is the common law DOC for trustees?

A

Wider, requires trustees to exercise standard of diligence/care expected of an ordinary prudent business person

141
Q

Which powers can trustees delegate?

A

Everything except dispositive ones

NOT to beneficiaries

Investment power delegation must be in writing

SQE1 FLK 2 (19 decks)

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