Trusts

Question 1

what is the basic requirement for the formation of a trust?

Answer 1

to form a trust you need 3 people.

You need a truster a trustee and a beneficiary.
As a lawyer, i would check that a trust has been formed correctly.

Question 2

who owns the trust property?

Answer 2

the trustee has a real right over the property however, the trustee has no right to use the property.
the truster has a personal right in the property.
the beneficiary has a personal right in the property.

Question 3

what is a special trust?

Answer 3

a trust which has been set up for a specific purpose. this will be stated by the truster what it is for.

Question 4

what is a discretionary trust?

Answer 4

this is a trust where the trustee has some ability to use the trust property as they wish. this may be by selling the property and placing it in shares. however, the benefits of this will always go to the beneficiary.

Question 5

what is the job of the trustee?

Answer 5

the job is usually to hold the trust property for the beneficiary. They have a fiduciary job which means that they need to do everything which would benefit the beneficiary. the trustee accepts the responsibility of distributing the property or fund.

Question 6

end of office of the trustee

Answer 6

a trustee can resign or a trustee may be taken down if they die. in this case the truster must appoint another trustee or trustees to take over the trust.

Question 7

trust purposes- void

Answer 7

a trust will be void if there is no human benefit
it is contrary to public policy.
the trust is too vague or uncertain. 
it seeks to be damaging to the public
if illegal.

Question 8

private trusts

Answer 8

private trusts are for the benefit of the individual. needs to confer benefit on an individual.

Question 9

mortis causa trusts

Answer 9

these trusts take effect on the death of the testator if it is their will.

Question 10

inter vivos trusts

Answer 10

this is a trust created by the living.
there are 2 requirements.

firstly they must vest property in the trustee.

secondly they must say what pourpose the trust is for. this will have the beneficiaries names.
usually they will confer a small amount of money first to establish the trust then once it is established it will come into existance.

Question 11

simple trust

Answer 11

simply gives the trustee the property and then the property is held and transferred to the beneficiary when requested.

Question 12

what is a liferent?

Answer 12

usually a liferent is where a trustee holds a house for a beneficiary while the beneficiary lives in it. a right to have the property for life but do not have the right to dispose of it.

Question 13

what is real subrogation?

Answer 13

where the trust property is sold and transformed into something else, for example, a house is sold to invest in shares, the trust is sill the same it has changed form.

Question 14

what are the three different types of breach of trust

Answer 14

these are ultra vires - this is where the breach is outwith the powers of the trustees

intra vires - this is where the trustees do something that is within their powers however they do it badly.

breach of fiduciary duty.- this is where they have breached their duty (basically ultra varies)

Question 15

what dictates whether a trustee is personally liable or not?

Answer 15

a trustee will be personally liable for losses that they have caused.
if there is no loss, then they are not liable.
if they are told not to invest in housing but they do it anyway and they make a profit so there is no loss to the trust, then they are not liable. however if they lost money then they are personally liable.

Question 16

what happens if the trustees have breached the trust through the dealing with a third party?

Answer 16

A breach of trust will not be void if this happens and will not be voidable either.

Question 17

do trustees have a right to give away assets of the trust?

Answer 17

trustees do not have any right to give away trust assets apart from to the beneficiaries at their request. if they do, the donation is voidable.

Question 18

removal of a trustee in serious breach

Answer 18

the trustee can be removed by the court on the petition of the beneficiaries or the co-trustees. new trustees can sue old trustees for the breach they caused.

Question 19

what happens if there is an exclusion clause which excludes all liability of trustees?

Answer 19

this will usually exclude liability for ordinary negligence but not gross negligence or fraud.

Question 20

uncertainty of a meaning of a provision in a trust.

Answer 20

they can opt for a declaritor from the court.

Question 21

trustees liability and what they can claim back

Answer 21

trustees (if liable to third parties) can claim back on the trustees estate for reimbursment.

Question 22

trust becomes insolvent

Answer 22

if this happens then the creditors will usually try to hold the trustees liable for the losses. the trustees need to contract as trustees and be known to the other party for them to not have any liability.

Question 23

insolvency and beneficiaries

Answer 23

if beneficiaries become insolvent then the creditors can take from the trustees.

Question 24

truster becomes insolvent

Answer 24

those who are insolvent must conserve their assets for the creditors. if there ha been a transfer, the creditors will ask that it is re-transferred.

Question 25

trustee becomes insolvent

Answer 25

no effect on the trust.

Question 26

trust becomes insolvent?

Answer 26

becomes sequestrated

Question 27

alimentary liferents

Answer 27

1. property is given to trustees for providing the liferenter with funds for his education and support.
2. protection from creditors of the liferenter.

Question 28

what are the different ways to vary a trust?

Answer 28

1. confer broad powers on the trustees so that no variation needs to be made in the first place
2. All the beneficiaries must consent to the changing of the trust. (if private)
3. public trusts can be changed through the cy pres doctrine. if the pourpose is impossible to be performed then the court can change the trust to a similar purpose. (only for public trusts)
4. any beneficiary may assign or resign their right of the trust to a third party.

Question 29

who can challange the actions of a trustee?

Answer 29

a beneficiary
the trustor
a co trustee
creditors

Question 30

what are the consequences of actor in rem suam?

Answer 30

1. the trustee will be in breach of the trust.
2. where the truste gains profit or property, a constructive trust will be placed around this and the beneficiaries will benefit from this.
3. any transaction where the trustee is in breach will be capable of reduction

Question 31

rules around conflict of interest?

Answer 31

1. a trustee may not transact with the trust.
2. a trustee cannot take personal advantage or profit from his position
3. the trustee is not entitled to paid work they take it on gratuitously