Trusts and their purpose

Question 1

Trust Creation

Answer 1

Creation by deed

Creation by will

Creation by statue

Trusts not separate legal entities

Question 2

Valid Trusts - three certainties

Answer 2

Intention - State a trust to be created

Object - state whom the trust is intended

Subject matter- State the trust property

Question 3

Bare Trusts

Answer 3

• Assets held until beneficiary turns 18 year old
• Trustee obeys instructions of beneficiaries ; trustee nominee only
• Tax falls to beneficiary

Question 4

Interest in possession (Life Interest Trust)

Answer 4

Life Tenant = income from trust , once dead then

Remainderman = receives capital when life interest ends

Beneficiary of income differs from benefitting of assets

Question 5

Power of Appointment Trust (Flexible)

Answer 5

Power to appoint beneficiaries
Power to vary terms of trust

Common Life assurance policies

Question 6

Discretionary Trust

Answer 6

Absolute discretion to distribute income to beneficiaries
Has power of appointment

Absolute discretion for trustee to distribute income to beneficiaries

Flexibility

Commonly used with learning difficulties

Question 7

Charitable Trust

Answer 7

No Tax Payments

Question 8

Accumulation and Maintenance Trust

Answer 8

Allow property to accumulate until 25 beneficiary

Note: no longer permitted

Question 9

Trusts

Answer 9

Not seperate legal entities

Question 10

Settlor

Answer 10

Sets up trust

Question 11

Trustees

Answer 11

Legal owners of the trust property

must be Sui juris (over 18 and of sound mind)

Question 12

Beneficiaries

+ 3 types

Answer 12

Whose benefit the trust is created

Types

Absolute vested interest - Full equitable ownership

Life interest = get income of trust but not capital

Remainderman= receive capital of trust