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JO2 Trusts > Chapter 1 > Flashcards

Chapter 1 Flashcards

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0
Q

What is common law?

A

A legal concept where law Id developed by judges rather than legislation

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1
Q

Why are trusts created

A
  • For legal and admin reasons. Beneficiaries under 18 or flexibility amongst beneficiaries, ie some not yet born
  • For protection, disabled person
  • Tax planning reasons
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2
Q

What are the three certainties of a valid trust?

A

1) words, intention to create a trust
2) subject matter, the property being transferred
3) objects, the beneficiaries of the trust

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3
Q

What is a trust

A

A way of transferring property for the benefit of other people without giving them full control over it.

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4
Q

The legal definition of a trust

A

Where an individual transfers a legal obligation to

  • the trustees , a binding person
  • to deal with property over which they have control
  • for the benefit of certain people.
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5
Q

Are the assets of the trust part of the trustees estate?

A

No

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6
Q

Who’s name are the trust assets held in?

A

The trustees

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7
Q

What’s powers do the trustees have?

A

To manage, employ or dispose of assets in line with the terms of the trust

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8
Q

Who has the legal ownership of the trust property?

A

The trustees

The beneficiaries are the beneficial owners

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9
Q

Can a trust hold an NISA?

A

No

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10
Q

What are the different types of asset in legal terms?

A

Reality- freehold in land
Personality- divided into
1)chattels real, leasehold on land
2) chattels personal- choses in action(intangible assets) choses in possession (tangible assets)

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11
Q

What’s the difference between contract law of trust law?

A

1) there’s no agreement between settlor and beneficiaries so no consideration needed
2) beneficiaries need not know about the trust- no offer or acceptance
3) trusts originated from equitable law not common law
4) trust law developed over the centuries

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12
Q

Can a person be a trustee and a settlor?

A

Yes

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13
Q

What’s a protector?

A

Relevant for off shore
Has powers to veto decisions made by trustees or remove them
They are not usually a trustee

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14
Q

How many trustees are needed if the trust includes land?

A

Minimum of 2 unless one trustee is a trust corporation maximum number of 4

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15
Q

Criteria for being a trustee

A

Aged 18
Of sound mind
Ok to be bankrupt

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16
Q

Benefits of appointing a corporation as trustee

A

A company will not die
Professional expertise
Down side is there will be a charge

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17
Q

Duties of trustees

A 
•adhere to trust terms/deed
•protect the assets/property
•act with due diligence and integrity
•not profit from their role as trustee
• be registered as legal owners on any documents
•do everything for the benefit of the beneficiaries 
•Have statutory duty of care
•retain proper accounts of the trust property
•invest cash wisely 
•Obtain proper advice
•Monitor investments
•Keep records
•avoid conflict of interest 
Use utmost diligence 
Avoid conflict of interest
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18
Q

What must trustees take account of with standard investment criteria

A

The suitably of the investment to the trust and the need for diversification

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19
Q

Who must agree to make any trust changes

A

All trustees must agree unless wording says differently

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20
Q

Section 31 of trustee act 1925 states…

A

Trustees have power to apply trust income to any infant beneficiaries for maintanence or education

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21
Q

Section 32 of trustee act 1925 states…

A

Gives powers to apply half the monies for the advance of the beneficiarie.
They would need to take this off if they later got absolute entitlement to make it fair

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22
Q

Can trustees invest in property?

A

Yes they can buy leasehold or freehold for beneficiary to live in or rent out

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23
Q

Initial trustees can be appointed in what ways?

A

By a trust deed
Created by a will, executors will be the trustees
Created by laws of intestate, the administrators will be the trustees

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24
What are the reasons to replace a trustee ?
``` Died Outside uk for 1yr plus Old trustee wants to be discharged Refuses to act Unfit/ incapable of acting Is an infant The power to appoint rests with the remaining trustees The court can appoint new trustee if all above fail ```
25
Who can remove a trustee
An appointed named in the deed There must be sufficient trustees left No more than four if the trust property includes land If no Appointer then all beneficiaries can appoint new trustees
26
How can A trustee retire
By the use of a deed of retirement trust Corporation with at least two trustees remain Trustees consent to the deed
27
What happens on the death of a Trustee
- The trust continues but cannot give a goods receipt for the proceeds of the sale of land with one Trustee - If last surviving trustee dies legal personal representatives can act until another appointment is made - I trust is not made void by the death of all the trustees
28
Under the trusty act 2000 trustees can appoint agents with any of their powers ?except for what
Powers over distribution of trust assets How fees are dealt with Appointment of new trustees The delegation of trustee powers Delegation must not be for more than one year Written notice must be given to all the trustees within seven days
29
What will happen if trustees abuse their duties
The law will hold them liable for any loss Failure to act can amount to a breach of duty A trustee is only accountable for their own actions not any of the trustees
30
What are the consequences of trustee breaching trust
Court injunction preventing the Trustee from taking action Court can order the trustee to make restitution to the beneficiary Order the return of any trust property wrongly transferred
31
What does an absolute interest give the beneficiary
Full equitable ownership to income and capital that cannot be taken away
32
What is the life interest beneficially entitled to
Income from the trust but no capital | They are called a life tenant
33
What do the remaindermen of the trust receive
Full entitlement to income or capital after the death of the life tenant Also known as a reversionary interest
34
What is a contingent beneficiary
Their interest depends on the occurrence of an event
35
Can minor beneficiaries demand for their shares
No
36
When can beneficiaries bring a trust to an end
All the beneficiaries are ascertained there is no possibility of further beneficiaries They are full age and capacity All the beneficiaries agree
37
How is an express trust created
Buy some written method such as a deed or are will
38
How is an implied trust created
Implied from the actions and intentions of the parties
39
What is a purpose trust
Not for individuals as beneficiaries but to maintain a building
40
What is a successive trust
To provide for a succession of events passed down through the family A succession of interests
41
What is a constructive trust
One in posed by law
42
What is a resulting trust
It is where there is a failure in the trust on which the property is held
43
Who benefits from a bear or absolute trust
They become the legal ownership of the Trustee | For the benefit of the beneficiary or beneficiaries absolutely
44
Who are the beneficiaries of a discretionary trust | discretionary trust became relevant property trust and Finance act 22nd of March 2006
There is normally wording such as "for my children or grandchildren and no one named beneficiary"
45
What event will create a potential liability for a charge to inheritance tax within a relevant property trust/ post 2006 discretionary trust
``` When relevant property is transferred out of the trust When a 10 year anniversary occurs Exceptions to this are- IIP's before March 2006 Created via a will trust Set aside for a disabled person Set aside for a bereaved minor put into an 18 to 25 trust ```
46
When might a relevant property trust suffer a charge to I HT
When property is transferred out of the trust or on a 10 year anniversary
47
Does an immediate post death interest trust qualify as a relevant property trust
No it will not even though it it creates a successive interest There will be no IHT Exit or periodic charges
48
What are the benefits of a power of appointment trust/flexible trust
``` It can cater for changing family circumstances Replacement beneficiaries must come from the class of potential beneficiaries ```
49
What are the aims of an accumulation and maintenance trust
They are type of discretionary trust No I HT advantages since Finance act 2006 Beneficiaries become legally entitled to capital or income before the age of 25 The trust must not last longer than 25 years The trustees have the power to apply income for maintenance or education
50
List The uses of a trust
Tax planning and mitigation Intestacy Will planning To provide a pension To provide for families To assist a charity To give property to those who legally cannot hold it To provide for disabled or vulnerable people To gain protection from creditors and business protection To create ownership of land joint tenants tenants-in-common
51
Who inherits a deceased share of the property held in the joint tenancy
The surviving joint tenant
52
Can a person be a trustee and a beneficiary
Yes
53
Who are the legal owners of trust property
The trustees
54
What is a person who puts assets into trust called
There Settlor
55
Who can be a trustee
Anyone aged 18 and of sound mind Can be a trust corporation No max limit other than land trusts (4)
56
Can I TRUSTe be replaced if they refuse to act
Yes
57
What happens to a trust when I sold trusteed dies
The sole trustee's legal personal representatives take over as trustees Once they have obtained probate or letters of Administration
58
What is the penalty for a trustee committing a breach of trust
They have to compensate the beneficiary for any loss caused by the breach
59
What is an implied trust
One that is treated as an existing because of the actions of the parties
60
What is a discretionary trust
A trustworthy distribution of income and capital is entirely at the discretion of the trustees
61
Give three common reasons for creating a trust
Tax planning and mitigation For charitable purposes To provide for families
62
Can the interest of a joint tenancy left in a will
No, as this interest will pass automatically to the other joint tenant
63
The secular creates the trust which in turn creates a legal obligation on what?
1- the trustees, binding them. 2- to deal with property over which they have control. 3-for the benefit of certain other people, the beneficiaries
64
What must A settlor be?
Over 18 of sound mind It's the person who transfers the assets into the trust
65
What can a beneficiary have from an absolute interest trust?
Both income and capital
66
What does the beneficiary of a life interest get?
Income for life
67
What it a remainderman?
The people who benefit from the property after the life interest has died
68
What the the reversionary interest have?
The have a future interest in the trust property
69
What does a contingent interest have?
A benefit on the occurrence of an event
70
List the types of trust
Express- creates in a will Implied- by actions of the settlor Presumptive- assets bought in the name of another Purpose- for a specific purpose- i.e. To maintain a property. Successive- trust for a succession of interests that happen one after each other. Constructive- imposed by law Resulting- created when a trust fails
71
List the use of trust
* Tax planning * Distribution of estate on intestacy * Will planning * Protection and certainty * Pension planning * Provide for family and minors * Help charity * For ownership of land.
72
Where does the trustee act 2000 apply?
Only England and Wales | Scotland and Ireland have separate acts.
73
Where does the trustee act 1925 cover?
England | Scotland has another one
74
What three things must a trust have?
Trustee Property Beneficiary
75
What investment cannot be held in a trust?
ISA
76
What is "reality" untrustworthy property
Freehold interest in land
77
What is personality trust property?
Other assets - Chattels real- leasehold interest on land Chose in action- intangible asserts- life insurance assets and reversionary interests etc. Chose in possession- tangible- art, jewellery, furniture
78
Is a trust covered under contract law?
No as there is no agreement between parties as they may not know about it. They may be no consideration.

JO2 Trusts (9 decks)

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