Chapter 16 Flashcards
(13 cards)
What is a trust?
A relationship recognised in equity that arises where a settlor either during their lifetime or on death places property under the control of another (trustee) who is compelled by equity to hold and deal with that property fro the benefit of another person (beneficiary)
Who is the trust relationship between?
The trustee and beneficiary
What are express private trusts?
Trusts that are intentionally made by a settlor
Who is the settlor?
The person who decides what property to place into trust - the property is called the trust property / fund
What are the 3 main categories of express private trust
- Bare trust
- Interest in possession trusts
- Discretionary trusts
What is a bare trust? and how are they treated for income and inheritance tax purposes?
A trust whereby the settlor creates the trust without imposing active duties upon the trustee
Bare trust = sometimes known as nominee arrangements
For income & inheritance tax purposes - not treated as a type of trust
What is an interest in possession trust?
A trust created by a settlor where a beneficiary of the trust enjoys an interest in possession over some or all of the trust property
Exists where the beneficiary has immediate entitlement to the net income as the income arises
Name the different types of interest in possession trusts
- Where a beneficiary enjoys their interest on possession for their whole life
- Where the beneficiary enjoys their interest for so long as someone else is alive (interest our auto vie)
- Where the beneficiary enjoys their interest for a fixed period of time
Who is a remainderman?
Another beneficiary who becomes absolutely entitled to the trust property when the trust comes to an end - they are said to have reversionary interest
What is a resulting trust?
A trust whereby no person is expressly in the trust deed as the remainderman so the settlor is the remainderman
What is a discretionary trust?
An express trust that isn’t either bare trust or interest in possession trust - Beneficiaries have no immediate right to the use of the trust property
Useful as flexible!
Describe the difference between and exhaustive and non-exhaustive discretionary trust
Exhaustive - where the trustees are under a duty to distribute all of the net income of the trust
Non-exhaustive - the trustees have a discretion whether to distribute the net income of the trust
When a trust is settles, who has the legal and equitable ownership of the property?
It is divided between the trustees and beneficiaries respectively
