Unit 1

Question 1

What is an express trust?

Answer 1

Any trust which the settlor wanted to create. Expressly wanted property to be held by one person for the benefit of another

Question 2

What is an implied trust?

Answer 2

No expresss intention but one arises due to surrounding circumstances, so the law assumes that a trust was intended or should be imposed

Question 3

What can express trusts be divided into?

Answer 3

Fixed trusts and discretionary trusts

Question 4

Give an example of a fixed trust

Answer 4

If the settlor has fixed from the outset who the beneficiaries are and how much they are going to get

Question 5

Give an example of a discretionary trust

Answer 5

Having trustees be able to take into account circumstances which may arise. E.g. “ such of her children as the trustees shall, in their absolute discretion, select”

Question 6

What are the two types of implied trusts?

Answer 6

Resulting trust and constructive trust

Question 7

What are resulting trusts?

Answer 7

The trustees hold property on trust for the person, originally creating the trust because of certain circumstances
An implied trust as it is presumed that the settlor would have intended such a trust if they had thought about it in the circumstances.

Question 8

What is a constructive trust?

Answer 8

Implied trust. Imposed to achieve a fair result between parities involved when it wouldn’t be fair to allow the legal owner to have full enjoyment of the property they hold.

Question 9

What rights does equitable interest give beneficiaries?

Answer 9

Personal
Proprietary

Question 10

What is a beneficiaries personal right for equitable interest?

Answer 10

Beneficiaries have a personal right to enforce the trustees duties and to seek compensation for any breaches. It is enforceable against the trustees personally

Question 11

What is a beneficiaries proprietary right of equitable interest held by trustees?

Answer 11

AN OWNERSHIP INTEREST IN THE TRUST PROPERTY ITSELF

This right can be enforced against trustees but also their successors e.g. cannot be given to creditors in a case of bankruptcy and binds trustees personal representative when they die.

Question 12

Name three things which are important in order to advise beneficiaries
( the nature of beneficial interest so the terms of the interest)

Answer 12

Whether the interest is unconditional or conditional and liable to fail if the condition is not satisfied

When the beneficiary will get their interest

When the beneficiary is entitled to do it

Question 13

A beneficial interest may be described as what?

Answer 13

Vested or contingent
Ion posesssion or in remainder
Absolute or limited

Question 14

What is vested interest?

Answer 14

A beneficiary has vested interest if they exist and do not have to satisfy any conditions imposed by the terms of the trust before claiming entitlement as right to trust property

Question 15

What is contingent interest

Answer 15

If the entitlement of the trust is conditional upon happening of future events or a beneficiary not in existence. E.g. for my grandchildren

If this is satisfied the interest becomes vested

Question 16

What is resulting trust

Answer 16

When one interest fails and no contingency plan is in place the trust property will be returned to the settlor or their estate if they have died.

Question 17

What is the difference of interests in possession and interests in remainder?

Answer 17

In possession means the beneficiary can enjoy it immediately and in remainder means they have to wait until another beneficiary’s right to enjoyment expires

E.g. Sarah gives £500,000 to trustees to hold on trust ‘for my husband, Hugh, for life and on his death for my son, Peter’.
Hugh has an interest in possession because he is entitled to immediate enjoyment of the property held in the trust. The effect of the phrase ‘for life’ means that Hugh will only be entitled to receive the income generated from investing the £500,000 (see para 2.3.1 above). He will receive this for the rest of his life.
While Hugh is alive, Peter must wait to enjoy the trust property, and so Peter has an interest in remainder. When Hugh dies, his interest does not pass under his will. Instead, Peter’s interest ‘falls into possession’ and he is then entitled to enjoy the trust property

Question 18

What is the difference between absolute and limited interest?

Answer 18

Absolute interest is capital and limited is income only

E.g. ‘for life’ means the beneficiary only has the entitlement for the interest generated from the capital so they have income only interest. It is usually limited for a lifetime.

Question 19

How may an expressed trust be created in a settlors lifetime?

Answer 19

1. Settlor declares self as trustee e.g. the opener to declare their holding an asset for the benefit of someone else (on trust for…) so the original owner is the trustee
2. Settlor transfers property to trustees on trust e..g the settlor does not retain the legal title but transfers it to trustees to hold for a designated beneficiary. E.g. a solicitor

Question 20

How may a express trust be created?

Answer 20

By will. Settlors can create trusts via their will. The settlor is then called a testator and these trusts will have no effect until they die.

Question 21

What are two types of implied trusts?

Answer 21

Resulting and constructive

Question 22

What is a resulting trust

Answer 22

Under a resulting trust the trustees hold onto the trust for the settlor.
They are implied in defined situations
E.g. a gap in beneficial ownership e.g. no contingency plan if the beneficiary dies before the condition of reaching 21

Question 23

What is a constructive trust?

Answer 23

Constructive trusts arise in certain circumstances when it would be unconscionable for the legal owner of the property to deny the claimant equitable interest.

Question 24

What is the first step when someone dies?

Answer 24

Administration.

Their estate is dealt with by personal representatives. Who will then use the estate to pay any inheritance tax and then distribute to the beneficiaries.

If a PR is a named person in a will they are an executor who ten obtain a Grant of Probate allowing them authority given by the will.

If there is no will or it does not name any executors then statutory rules come into play. This will then be relatives who will be now administrators and will obtain a grant of letters of administration to allow them to deal with the estate.

Question 25

Formalities of a will

Answer 25

A person who makes a will is called a testator
By s.9 of the Wills Act 1837 the will must be in writing and signed with two witnesses. This can be altered later using a codicils which also needs two witnesses present.

Question 26

What are the types of gift in a will?

Answer 26

A devise is a gift of freehold land (realty)
A legacy or bequest is a gift of personal property or personality e.g. anything other than realty e.g. jewellery
Pecuniary legacies are gifts of money
Residuals gift is a gift of what remains e.g. what remains after payments of debts, tax, specific legacies, devises and pecuniary legacies e.g. i give the rest of my property to my wife.
Gifts on trust - a will need not make a gift directly to the beneficiary but instead trustees.

Question 27

What is a Pecuniary legacie?

Answer 27

gifts of money

Question 28

What is a residual gift?

Answer 28

gift of what remains e.g. what remains after payments of debts, tax, specific legacies, devises and pecuniary legacies e.g. i give the rest of my property to my wife.

Question 29

What is a gift on trust?

Answer 29

will need not make a gift directly to the beneficiary but instead trustees.

Question 30

When can there be a failure of gifts?

Answer 30

Ademption
Lapse
Revocation of wills

Question 31

What is Ademption?

Answer 31

if the testator no longer posesses the specified property when he dies

Question 32

What is a lapse?

Answer 32

Any gift will fail if the beneficiary dies before the testator
A lapsed specific or pecuniary gift falls into the residuary estate. a lapsed residuary gift passes under the intestacy rules

Question 33

Revocation of wills?

Answer 33

revocation can happen before death either marriage of the testator, destruction of a will with intention to revoke and the making of a new will which deals with the same property as the first will.

Question 34

How can individual gifts be revoked?

Answer 34

by codicil

Question 35

When are the instancy rules applicable

Answer 35

they apply to the whole estate if the deceased made no will or to his residuary estate if his will contains no residuary gift or if zed gift has filed or been revoked

Question 36

Who benefits from the instancy rules.

Answer 36

The deceased estates passes to the PR’s who pay tax and debts then the remains are shared between relatives, called statutory next of kin according to entitlement

Question 37

Differences between testator and personal representatives

Answer 37

when the administration of the estate has been completed, the PR’s cease to hold the subject matter of the trust as PR’s so must assent the trust properties to the trustees appointed by the will.,

often the same people are trustees and Prs so only must assent to themselves.

Question 38

How do equity and trusts have a role to play in the commercial world?

Answer 38

Pensions
Collective investment schemes
Trusts and insolvency
Fiduciary duties
Constructive trusts

Question 39

How do trusts play a role in pensions?

Answer 39

Pension funds are held by trustees on trust for their members
The trust device allows management the phone to be vested in a few e.g. Trustees put gives equitable interests to their members. 

Question 40

Collective investment schemes?

Answer 40

An investment manager raises money from members of the public then the contributions are pooled and invested and the profits are shared between the contributors.

Question 41

Trusts and insolvency?

Answer 41

In bankruptcy or liquidation their property is divided among the creditors according to order of priority.
Ordinary unsecured creditors appear at the bottom and it is likely there will be insufficient property left to give them more than a small percentage.
Having equitable interest - real owner you do not need to be in the list

Question 42

Fiduciary duties?

Answer 42

Equity imposes trustee-like duties (which are called ‘fiduciary duties’) on certain people whooccupy positions of trust (particularly company directors and partners in a business). Thus,equity has been used to impose standards of honesty and good faith in certain business relationships