Unit 1 Flashcards
Introduction & the Concept of a Trust
What is a trust?
Equitable obligation on trustee.
Holds trust property.
On behalf of the beneficiaries (the ‘true’ owners of the trust property).
What is meant by ‘settlor’ / ‘testator’
The individual who creates the trust and transfers the trust property to the trustee(s)
What are ‘trustees’
Individuals who manage the trust property for the benefit of the beneficiaries.
They own the LEGAL title to the property.
What is a beneficiary?
The individual(s) who benefits from the trust.
They own the EQUITABLE interest to the trust property.
How is a trust created?
- Declaration of trust
- Transfer of trust property to trustee(s) (constitution)
List the key features of a trust
Separation of legal and equitable titles / interests of the trust property.
T is nominal owner.
B have proprietary rights.
Under a fixed trust, what is meant by the ‘proprietary interests’ of the beneficiaries?
B will have equitable proprietary rights over the assets. A beneficiary’s interest is enforceable against anyone acquiring the trust property except a bona fide purchaser (acting in good faith & unaware).
If properly authorised, these rights are overreached (i.e. purchaser / transferee acquires the proprietary interests in the trust property).
What are the personal rights (beneficiaries) under a fixed trust?
Rights to ensure proper administration of the trust.
Right to be informed.
Rights following breach of trust.
Rights against third parties.
Tortious rights (typically the T who will bring a claim given they are the legal owners. Where T refuses to sue tortfeasor, B can bring proceedings – ‘Vandepitte procedure’).
Right to trust documents.
What are the proprietary rights (beneficiaries) under a discretionary trust?
Beneficiaries have NO such rights because trustees will dictate whether they have an equitable share in the trust property. Down to T discretion.
What are the personal right (beneficiaries) under a discretionary trust?
Application to court.
Rights arising from breach of trust.
Rights to be informed.
What is a fixed trust
The interests of the beneficiaries have already been defined by the settlor. The trustee must carry out those terms and distribute the fund as has been specified.
What is a discretionary trust?
Trustee(s) dictate and manage how the trust property is allocated between the beneficiaries.
Contrast the difference between vested and contingent beneficial interests
Vested = B does not need to satisfy any conditions prior to obtaining trust property.
Contingent = B must satisfy conditions before being entitled to the trust prop.
What is the difference between limited and absolute?
Limited = income only.
Absolute = capital.
What is the difference between in possession and in remainder?
In possession = has access to trust property immediately.
In remainder = the beneficiary is entitled to the trust property sometime in the future.
