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Question 1

What are the requirements for a valid express trust?

Answer 1

• capacity to make the trust
• three certainties I.e.bintention, subject matter and objects
• compliance with legal formalities
• constitution of the trust

Question 2

How can you have sufficient capacity to make a trust?

Answer 2

The settlor must be aged over 18 and must have the necessary mental competence (which differs depending on the circumstances). If giving away a large part of the estate, the larger the asset the greater degree of understanding required.

Question 3

What are the three certainties?

Answer 3

Intention, subject matter and objects, they must all be present for a valid trust (Knight v Knight).

Question 4

What is certainty of intention?

Answer 4

The settlor must intend to create a trust.

Question 5

What is certainty of subject matter?

Answer 5

The nature and extent of the property is clear and the interests of the beneficiaries can be ascertained.

Question 6

What is certainty of objects?

Answer 6

It must be clear who the beneficiaries are.

Question 7

In relation to the creation of express trusts, which of the following statements is not correct?
A) a trust can be created orally or even from actions from the individuals concerned
B) in order to be valid an express trust must always satisfy the 3 certainties
C) a trust may be created by deed or in a will
D) there is no age limit for the creation of express trusts
E) in addition to complying with the rules on capacity and three certainties, the rules of formalities and constitution must also be present

Answer 7

D in order to comply with capacity the settlor must be 18 or over.

Question 8

How do we determine whether something is intended to be a gift or a trust?

Answer 8

Scrutinise the words used either in writing or orally as well as all relevant circumstances.

Question 9

Does the word trust need to be used for it to be valid?

Answer 9

No (Paul v Constance) also supported by the maxim equity will look to the intention not the form.

Question 10

When looking at the wording to determine if something is a trust or a gift, what must we consider?

Answer 10

The wording used must be clear and unambiguous and they must indicate a trust is intended.

Question 11

What type of words will fail in being clear and unambiguous?

Answer 11

Hope, wish or desire the property to be dealt with in a certain way (Lambe v Eames).

Question 12

Why did the courts find there was a trust in Comisky but not in Re Adams?

Answer 12

The wording was ambiguous in Comisky however there was a further provision which said it would go to his nieces in any event, the circumstances as a whole showed an intention to create a trust. The wording in re Adams ‘do what is right’ was too ambiguous.

Question 13

Give a case example of when a trust was used in a commercial context?

Answer 13

Re Kayford which was a mail order company. When it started to get into financial difficulty it out money received from customers into a separate bank account with the intention of keeping it separate from the general funds of the company. A trust was successful.

Question 14

Which of the following words or phrases are unlikely to indicate intention to create a trust?
A) will distribute
B) to divide equally
C) in the hope that
D) to hold
E) in the certain knowledge

Answer 14

C

Question 15

In a commercial context, particularly involving the insolvency of a business, a creditor or customer of the business may argue that they are the beneficiary of a trust and if successful, this would put them in a secure position. Which of the following statements is correct?
A) placing funds into a separate bank account is essential for a trust to arise in a commercial context
B) restrictions on the receipients use of the funds, on its own, can be enou to create a trust
C) if there is a written agreement in place between the parties which does not mention a trust being created then this means there can be no express trust in existence
D) is a bank account is set up and named as a trust account for customers then this will be sufficient to create a trust

Answer 15

B

Question 16

What must you consider when deciding there is certainty of subject matter?

Answer 16

• the property which is to be subject of the trust must be clearly defined I.e. 200 shares in Boots Plc
• the beneficial interests in the property must be clear I.e. We can work out who is to get what

Question 17

What was said in re Kolb with regards to identifying the property for trust?

Answer 17

That it must be clear and unambiguous. ‘Blue chip securities’ in this case was too vague and therefore there was no certainty of subject matter.

Question 18

Would it be sufficient for someone to say the beneficiary was to receive a reasonable income from the properties?

Answer 18

Yes. Re Golay said they could determine what would be a reasonable amount with reference to her previous standard and cost of living.

Question 19

What is a remainder provision?

Answer 19

Where someone will say give X to A and the remainder to B (Palmer v Simmonds - it failed as the courts were unsure which part of the property was to be passed on through the husbands will). The correct way would be to write X to A for life, remainder to B.

Question 20

What is the issue in relation to trusts over u allocated assets and give a case example?

Answer 20

If there are a large number of assets they should be segregated from the general stock to be identifiable. Re London Wine Company was a wine company who would store wine for customers. It became insolvent and the courts had to determine if the customers were entitled to their wine. Held not as they were all held together with other wines and they were unable to determine what belonged to whom.

Question 21

What was so important about the Hunter v Moss case?

Answer 21

It was distinguished from Re London Wine Company as they had said these were intangible assets and as all of the shares were exactly the same (ordinary shares) then that was fine.

Question 22

What happens to property if there is uncertainty of subject matter?

Answer 22

The property would fall back into the estate of the testator, be an absolute gift to the first person named in the clause or it may never leave the testators estate if it is not sufficiently defined.

Question 23

Which description in a will would not satisfy the test for certainty of subject matter?
A) 20 of my shares in C Limited to Jane
B) most of my jewellery to be given to Karen
C) the remainder of my estate

Answer 23

B

Question 24

Certainty of the beneficial share is an important aspect of the rule on certainty of subject matter. Which of the following does not satisfy the test for certainty of the beneficial shares?
A) £50,000 to my cousins, Rowan and Tom in equal shares
B) my 3 vintage cars to Jim and Bobby, Jim must select one for himself and then Bobby can have the other 2
C) I leave my share portfolio to my wife during her lifetime and then to my grandchildren in equal shares thereafter
D) £20,000 for the former employees of my company in such shares as my trustees shall decide
E) none of the above fail the test

Answer 24

E

Question 25

Trusts over u allocated assets will quite often fail. Which of the following is correct?
A) the subject matter of an inter vivos trust must always be segregated regardless of the type of property it relates to
B) inter vivos trusts over tangible assets will only be valid if the subject matter has been segregated
C) inter vivos trusts over part of the settlers shares in a limited company where the share numbers have not been specified will always be valid

Answer 25

B (Re London Wine Company)

Question 26

What is meant by certainty of objects?

Answer 26

Objects means beneficiaries so we need to be certain who the beneficiaries are.

Question 27

What is the general rule about objects?

Answer 27

They must be sufficiently clear and unambiguous so the trustees can work out who they are.

Question 28

What are the three types of provisions?

Answer 28

Fixed trusts
Discretionary trusts
Gifts with a condition precedent

Question 29

What is the rule for certainty of objects in fixed trusts?

Answer 29

The list principle.

Question 30

What is the list principle or the class ascertainability test?

Answer 30

It means you must be able to draw up a complete list of all the beneficiaries but the list must be conceptually and evidentially certain.

Question 31

What does conceptual certainty mean?

Answer 31

No vague descriptions of groups of people I.e. My friends, good customers etc as they are open to different interpretations.

Question 32

What does evidential certainty mean?

Answer 32

It should be possible to prove who the beneficiaries are I.e. My children can be proven by birth certificates or DNA.

Question 33

What is the rule for certainty of objects in discretionary trusts?

Answer 33

It used to be the list principle (IRC v Broadway Cottages Trust) however in Re Baden the court decided the list principle was not appropriate for this type of trust and they used their own discretion to select the beneficiaries however, it must be clearly defined. This is known as the is or is not test. You must be able to say whether an individual is in the class or outside of it.

Question 34

In a discretionary trust, if someone left £10,000 to my siblings at the discretion of the trustees, does each sibling have to receive something?

Answer 34

No they could give it all to one if they thought it was right to do so.

Question 35

What is the test for certainty of objects for powers?

Answer 35

The is or is not test meaning you must be able to say with certainty whether an individual is in the class or not.

Question 36

What is the issue with administrative unworkability?

Answer 36

A discretionary trust may fail if the class of possible beneficiaries is so large that it is not possible for the trustees to adequately survey the class and select from it (R v District Auditor).

Question 37

Is the following a gift or a trust? £100 to each nephew who holds a nufc season ticket?

Answer 37

A gift, in order to qualify for it you must satisfy the condition specified.

Question 38

What would happen if there was a lack of certainty objects?

Answer 38

The property would go back to the settlor or his residual estate.

Question 39

What is the one person test?

Answer 39

The class description must be sufficiently clear so it is possible to identify with certainty at least one person who falls within it.

Question 40

What is the correct test for certainty of objects for a fixed trust?

Answer 40

The list principle.

Question 41

What is the correct test for certainty of objects for a discretionary trust?

Answer 41

The is or is not test OR the individual ascertainability test.

Question 42

Which of the following statements is correct?
A) a fixed trust is one where the beneficiaries shares in the trust property are equal
B) a fixed trust is one where the settlor specifies the shares of the beneficiaries
C) a discretionary trust is where it is up to the beneficiaries to decide their own shares
D) a discretionary trust is one where the beneficiaries shares are at the discretion of the settlor

Answer 42

B

Question 43

How can express trusts arise?

Answer 43

Either orally or from the circumstances (Paul v Constance) or in writing (e.g. Wills).