Trusts and beneficial interests

Question 1

Creation of express trusts - Way 1 - Settlor declares self as trustee

Answer 1

Owner of an asset to declare that he holds the asset for the benefit of someone else

Question 2

Creation of express trusts - Way 2 - Settlor transfers property to trustees on trust

Answer 2

The settlor does not retain legal title to the asset but transfers it to trustees to hold on trust for a beneficiary. Create trusts in their wills. The trusts have no effect until the testator dies

Question 3

Creation of implied trusts - Resulting trust

Answer 3

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 4

Creation of implied trusts - Constructive trusts

Answer 4

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

Question 5

Features of a trust - Personal right

Answer 5

To enforce trustees duties and seek compensation for any breaches. Enforceable against trustee’s personally

Question 6

Features of a trust - Proprietary right

Answer 6

An ownership interest in property itself

Question 7

Discretionary trust

Answer 7

Gives trustees a discretion as to amounts any beneficiary may receive and/or whether particular beneficiaries receive anything at all. E.g as my trustees think fit

Question 8

Fixed trusts

Answer 8

Terms of trust defines share of trust property beneficiary will receive

Question 9

Beneficial interests - Vested interest

Answer 9

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 10

Beneficial interests - Contingent interests

Answer 10

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 11

Beneficial interests - Interests in possession

Answer 11

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

Question 12

Beneficial interests - Interests in remainder

Answer 12

‘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 13

Beneficial interests - Absolute interest

Answer 13

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

Question 14

Beneficial interests - Limited interest

Answer 14

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

Question 15

How can beneficiaries bring a trust to an end? - What interest do they need to have?

Answer 15

If the beneficiaries interest is vested and in possession and not limited in enjoyment then the beneficiary is described as absolutely entitled

Question 16

How can beneficiaries bring a trust to an end? - The bare trust rule

Answer 16

If they are absolutely entitled then a sole adult beneficiary can bring trust to an end by asking the trustees to hand the whole trust fund over to him or other trustees

Question 17

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

Answer 17

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 18

What happens if the beneficiary dies after the testator but after they’ve received their inheritance?

Answer 18

It is distributed amongst their own will and if they don’t have one the intestacy rules will apply

Question 19

Bare trust definition

Answer 19

A trust as one for personality. No formalities are required

Question 20

New trust concerning land

Answer 20

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

Question 21

Test for certainty in a fixed trust

Answer 21

Complete list test

Question 22

Contingent interests and remainder

Answer 22

If you can only get money after someone has died then you have a contingent interest - contingent on you being alive when that other person has died.

Question 23

Beneficiaries and ending the trust

Answer 23

The beneficiaries can end the trust by calling for a transfer of trust property to themselves, if all of the beneficiaries under the trust who could possibly become entitled are in existence and ascertained, are aged 18 or over, are of sound mind and agree.

Question 24

What do you get if you are a life tenant

Answer 24

An interest in income

Question 25

When will your interest turn from contingent to vested?

Answer 25

It becomes vested when you have satisfied the contingency e.g if you have attained 25.
Even when someone else has a life interest