Trusts and beneficial interests

Question 1

Creation of implied trusts - Resulting trust

Answer 1

Trustees hold on trust for the settlor and are implied in certain define situations. E.g Where there is a gap in beneficial ownership. E.g Settlor creates a trust for X if he attains 21 but does not say what is to happen if X dies before 21. X’s interest never vests because he dies. The trustee will hold the trust property on a resulting trust for settlor.

Question 2

Creating Express trust

Answer 2

Settlor must:
1) Make a valid declaration of trust
2) Constitute the trust (put assets into the trust - transferring assets)
Once these are both done the settlor cannot change their mind

Question 3

Creation of implied trusts - Constructive trusts

Answer 3

Arise in certain circumstances when it would be unconscionable for legal owner of property to deny the claimant an equitable interest

Question 4

Discretionary trust

Answer 4

Gives trustees a discretion as to amounts any beneficiary may receive and/or whether particular beneficiaries receive anything at all. Until the trustees exercise their discretion to distribute the property no member has a beneficial entitlement. If an individual object is selected by a trustee they have a vested right

Question 5

Fixed trusts

Answer 5

Terms of trust defines share of trust property beneficiary will receive

Question 6

Beneficial interests - Vested interest

Answer 6

A beneficiary has a vested interest if that beneficiary exists and does not have to satisfy any conditions imposed by the terms of the trust before becoming entitled as of right to trust property

Question 7

Beneficial interests - Vested interest - if the beneficiary dies before the trust property is paid over to them

Answer 7

The trust property will belong to the beneficiary’s estate

Question 8

Beneficial interests - Contingent interests

Answer 8

A beneficiary has a contingent interest if it is conditional upon the happening of some future event that may not happen or if the beneficiary is not yet in existence.

Question 9

Beneficial interest - Contingent interest - If the beneficiary dies before the happening of the stipulated event

Answer 9

Their interest will go back to the settlor unless the settlor has provided that the beneficial interest should pass to someone else

Question 10

Beneficial interests - Interests in possession

Answer 10

‘When will I benefit?’ - If it’s in possession then it means now - no one with a prior entitlement

Question 11

Beneficial interests - Interests in remainder

Answer 11

‘When will I benefit?’ - if it’s in remainder = later. He cannot enjoy it immediately but instead has to wait until some other beneficiary’s right to enjoyment expires

Question 12

Beneficial interests - Absolute interest

Answer 12

‘What do I get?’ - If an absolute interest = capital (get everything)

Question 13

Capital definition

Answer 13

A capital return relates to the underlying value of the property in question

Question 14

Beneficial interests - Limited interest

Answer 14

‘What do I get?’ - Limited interest = income only. Income = Interest, rent and dividends

Question 15

Income definition

Answer 15

Money received on a regular basis deriving from property e.g rent or dividends

Question 16

How can beneficiaries bring a trust to an end? - If there is a single beneficiary - Bare trust

Answer 16

Sole, adult, mentally capable beneficiary with a vested interest has a bare trust and they are absolutely entitled. The trustees must handle the trust property as the beneficiary dictates. Beneficiary can bring the trust to an end at any time by requiring trustees to convey the whole trust to themselves

Question 17

How can beneficiaries bring a trust to an end? - Saunders v Vautier

Answer 17

For more than one beneficiary. The beneficiaries can end the trust by calling for a transfer of trust property to themselves or other trustees so long as all the beneficiaries:
1) are all in existence and ascertained
2) are aged 18 years or over and have mental capacity
3) agreed to what is being proposed

Question 18

What happens if the beneficiary dies after the testator but before they receive an inheritance?

Answer 18

The share of the estate will be treated as part of the beneficiary’s estate and distributed according to the wishes in their own will.

Question 19

What happens if the beneficiary dies before the testator?

Answer 19

The gift lapses and goes back to the testator’s estate

Question 20

New trust concerning land

Answer 20

The declaration for the trust should be evidenced in writing and signed

Question 21

What do you get if you are a life tenant

Answer 21

An interest in income