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AF1 2018/19 > Trusts > Flashcards

Flashcards in Trusts Deck (36)
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What is a trust?

A settlement/trust is an arrangement under which assets are transferred to a trustee to look after on behalf or the beneficiaries


What are the names and roles of the 3 parties involved in setting up a trust?

*Settlor - the person transferring the assets into the trust and therefore giving up ownership
* Trustee - looks after the assets, this can be one or more individuals or a corporation


What ways can a trust be created? (7)

Oral statement
Circumstances that imply a trust
Execution of a deed
Court order
Operation of law


What are the requirements to be a trustee?

*Legal owners of the asset ( however this will never form part of their estate)
* Over 18
*Mentally capable
*Act within the terms of the trust


Can a settlor be a trustee and a beneficiary?



What is a contingent beneficiary?

This is a secondary beneficiary whose interest is dependent on the circumstances. They are second in line so will only receive assets if the primary beneficiary dies before the settlor


What happened with the ruling in Saunders v Vautier?

It stated that beneficiaries can end their trust provided that they are:
*have full mental capacity
*between them they have absolute entitlement to trust assets
* there is no possibility of other people becoming beneficiaries in the future


How many trustees can you have?

Any number ( however it is sensible to have more than one)


How many trustees are required for land?

Must be a minimum of 2 and maximum of 4 trustees


Can a professional trustee charge fees?

Yes provided they are professional. If non professional then they can't.


What are the expenses that a trustee can be reimbursed with?

*Provided they are properly incurred with the running of the trust
*Can apply for expenses of the agents


How will trustees be appointed

*Will ( normally the executors)
*Court order


When can a trustee be replaced? (6)

* on death
*Remains outside the UK for more than 1 year
*Wishes to be charged
*Refuses to act
*Is unfit/mentally incapable
*is under 18


In what 4 circumstances can the trustee retire without being replaced?

*Where there is an express power in the trust deed
*If at least 2 trustees of a corporate remain and they consent
*by court order
* By direction of the beneficiaries


What happens if a trustee dies?

*Their powers can be exercised by the remaining trustees
* if the last trustee dies, their legal representatives will act as trustees until a new appointment is made by the appointor
* the death of a trustee does not make the will invalid


Is a trustee liable for their own actions and the co-trustees?

They would be liable for their own actions but not those of their co-trustees


What is a breach of trust in reference to the trust?

This is where the trusteed acts outside of their powers or fails to act as required under the duties of a trustee


Can a beneficiary take legal action against a trustee if they think they are going to commit a breach of the trust?



What are the potential remedies that can take place if a court agrees to take action against the trustee? (5)

*Issuing an injuction to prevent the trustee from acting in breach
Ordering the trustee to make a payment to the beneficiary
*Setting aside a transaction
*Ordering the return of property wrongly transferred
*Removal of a trustee


When did the Trustee Act 2000 come into force?

1st February 2001
Its powers however are retrospective and therefore cover trusts created before that date


What is a general power of investment in respect to the trustee Act 2000?

The trustee can make any type of investment that could be made if the trustee were absolutely entitled to the trust assets.
(this does not apply to pensions, unit trusts, charitable trusts)


How often does the trust require that the investments are reviewed?

At least annually
Consider whether they should be varied


What is the standard investment criteria?

*The suitability of the investment to the trust i.e is it in the best interest of the beneficiaries
* The need for diversification
* Advice to be given where necessary for a qualified and experienced individual ( if a trustee cannot)


What is apportionment?

Trustees should act impartially between beneficiaries


How is apportionment covered with an interest in possession trust?

Interest in possession beneficiaries have different interests - ie one for income and one for capital. Therefore the trustees need to act and invest in such a way that both growth and income is achieved


What responsibilities of the trustees can never be delegated? (4)

*Distribution of assets
*How fees are allocated
*appointment of new trustees
*Any specified powers set out in a will


What is the definition of a bare trust? (4)

Known as an absolute trust
Specified beneficiaries that have absolute interest to the trust assets
Beneficiaries can access the funds at 18


What is a trust for a vulnerable beneficiary?

A trust set up for a mentally or physically disabled person


What is the specification for a trust for a disabled person?(2)

Trust assets must only be capable of being used to benefit the disabled person
The disabled person must be entitled to all the income if there is any


What is the definition of a disabled person? (6)

*By reason of mental disorder or of the Mental Health Act 1983 incapable of managing their own affairs
*increased disablement pension
*attendance allowance
*care component of the disability allowance at the high or middle rate
*Personal independence payment
*Armed forces independence payment