Trusts Flashcards
What type of ownership does a Trustee have and what is the minimum / maximum number of Trustees?
Legal owner at least one, there is no maximum usually 2 – 5, no majority voting must be unanimous, for land 2-4
What type of ownership does a Beneficiary have?
Equitable also know as the Beneficial owner.
What is the person setting up a Trust know as?
The Settlor
List five requirements / qualities of a Trustee?
- Over age 18
- Sane
- Responsible / Trustworthy
- Ideally younger than settlor
- lives locally and knows settlors wishes
What happens on the death of a Trustee?
Remaining trustee(s) continue and on death of the last one the Personal Representative appoints new ones unless the deed has APPOINTERS.
What are the seven circumstances when new trustee can be appointed?
(Powers of appointment Trustee Act 1925)
- Dead
- Outside UK 1 year
- Wishes to be discharged
- Refuses to act
- Is a minor
- Lacks mental capacity
- Want to retire from role
Trustee’s are the Registered legal owners list 7 duties they have.
- Hold title documents to any property
- Specific powers to deal with trust property
- Keep accounts (beneficiaries can request access)
- Duty of care, act as a prudent business person or legally liable
- Diligence
- Maximise returns without risking assets through speculative investments
- Review & consider suitability of investments – diversification/risk – take advice
Trustees can’t benefit from their position but list six actions they can do?
- Can claim expenses
- Can make money available for minors for maintenance/education/income until age 18
- Pay premiums
- Make claims
- Switch funds
- Exercise options (Life policy)
Trustees can use carefully selected agents, although what are the four actions they must do personally?
- Appointing new trustees
- Payment of fees
- Distributing assets
- Delegating powers
Joint beneficiaries will share unless trust says otherwise, what actions can they take?
- Ensure trustees act in accordance with trust provisions
- Insist accounts are audited
- Go to court if there has been a breach of trust
- End trust if all conditions met
(a) No possibility of future beneficiaries
(b) Over age 18 + mentally capable
(c) All agree
(d) Entitled to ALL trust property
What are the four ways a Trust can be created?
Trust Creation
- Deed;– legal assignment –specify trust property – name beneficiaries / trustees – powers/rights, must be signed by settlor and ideally trustees – standard or bespoke form
- Will; – known as a will trust, Executors act in place of trustees, created by statement in the will or bequest to minor, only takes affect on death of settlor and after probate has been completed, revoked if will revoked (cancelled)
- Trust required by law; dying intestate, must be held on trust, with power of sale, until it can be distributed, minor’s property held on trust until age 18
- MWPA 1882; own life, intended for spouse / children, do not need to mention the act if words make it clear the trust applies
What is a Secret Trust?
leave to legatee (person who receives a legacy) – real beneficiary someone else, must let legatee know real intention via sealed letter either before or after will is written they have a legal requirement to carry out obligations of the trust, half secret – mentioned in will but beneficiaries not stated, they are communicated to the legatee before or at the same time as will is made.
What “Trust Certainties” must exist for a trust to be valid (SOW) ?
- Subject = Assets
- Object = Beneficiaries
- Words = Show a trust was intended
There are ten potential uses of Trusts, how many can you recall?
- Save Income Tax, will not work if beneficiaries are settlors unmarried children under 18
- Mitigate IHT – takes out of estate after 7 years
- Intestacy Statutory Trust for unmarried children under age 18 & created through wills for minors until reach majority or certain age
- Set up pensions
- Family protection
- Irresponsible adult
- Charities
- Minor/ mental incapacity as can’t legally deal with own assets
- Disabled / vulnerable – has tax advantages
- Bankruptcy protection – can’t deliberately hide (bankruptcy creates a trust)
Varying the beneficiaries can only be done with a Power of Appointment or Discretionary Trust, although what are the exceptions that apply with all trusts
- Selling assets for a beneficiary with financial problems
- Transactions for the benefit of land including changing beneficial interests
- Beneficiaries on divorce
- Beneficiary can’t assent due to infancy/incapacity
- Contingent beneficiaries
- Beneficiary on future event
- Not born
- Discretionary interest in protective trust
- Can’t take away adult beneficiary who doesn’t agree
