Trusts MCQS Flashcards
True or False: A trustee can apply trust property exclusively for their own benefit.
A) False
B) True
A) False
(A trustee is under a duty to apply trust property for the benefit of the beneficiaries)
A CREST member is the registered owner of 100,000 shares in BT Group plc. It holds 50,000 of those shares for a broker. The broker acquired its interest in the 50,000 shares on behalf of a private investor.
Which one of the following statements is a correct description of the private investor’s position in relation to the 50,000 shares?
A) The investor has a legal and equitable interest in the shares
B) The investor has an equitable interest in the shares but not the beneficial interest
C) The investor is the legal owner of the shares
D) The investor does not have any interest in the shares
E) The investor has an equitable and beneficial interest in the shares
E) The investor has an equitable and beneficial interest in the shares.
(The CREST member is the legal owner of the shares. The broker has an equitable interest in the shares but no beneficial interest. The investor has an equitable and beneficial interest in the shares)
A trustee holds £50,000 on trust for a beneficiary. The trustee misapplies £10,000 of the trust money and gifts it to the local priest. The priest does not know that the £10,000 is trust money. The trustee misapplies another £10,000 of the trust money and purchases a car with the money. The seller knows that the money paid by the trustee is misapplied trust money. The trustee is made bankrupt.
Which one of the following statements is a correct description of the beneficiary’s rights?
A) The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee and in the £10,000 given to the priest, but not in the £10,000 paid to the purchaser
B) The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee but not in the £10,000 given to the priest or the £10,000 paid to the purchaser
C) The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee, in the £10,000 given to the priest, and in the £10,000 paid to the purchaser
D) The beneficiary does not have an equitable proprietary interest in the £30,000 held by the trustee, in the £10,000 given to the priest, or in the £10,000 paid to the seller.
E) The equitable proprietary interest which the beneficiary has in any assets held by the trustee will be subordinated to the claims of the trustee’s creditors
C) The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee, in the £10,000 given to the priest, and in the £10,000 paid to the purchaser
(The beneficiary of a trust has an equitable proprietary interest in the trust property which can be enforced against everyone except a purchaser of a legal interest who does not have notice of the trust. The priest is not a purchaser. The seller has notice of the trust)
True or False: The full legal owner of an asset has an equitable interest in the asset.
A) False
B) True
A) False
(The full legal owner of an asset has only a legal interest in the asset)
A man holds shares on trust for a beneficiary. He is also the bailee of some goods. His house is subject to a legal charge and an equitable charge in favour of two of his creditors. He also has a number of unsecured creditors. The man is made bankrupt.
Who is likely to be most prejudicially affected by the man’s bankruptcy?
A) The bailor of the goods
B) The legal chargee
C) The beneficiary of the trust
D) The unsecured creditors
E) The equitable chargee
D) The unsecured creditors
(An unsecured creditor has a personal right against their debtor. Unlike property rights, personal rights do not enjoy ‘priority’ in the event of the debtor’s bankruptcy)
A woman holds shares on trust for a beneficiary. She is also the bailee of some goods. In breach of her duties to the beneficiary and to the bailor, the woman sells the shares and the goods (for their full market value). The purchaser believes that the woman is the full legal owner of the shares and the goods.
Which one of the following statements is a correct description of the beneficiary’s and the bailor’s position in relation to the purchaser?
A) The purchaser is an agent for the beneficiary and the bailor
B) The beneficiary can recover the shares from the purchaser but the bailor cannot recover the goods from the purchaser
C) The bailor can recover the goods from the purchaser but the beneficiary cannot recover the shares from the purchaser
D) The bailor can recover the goods from the purchaser and the beneficiary can recover the shares from the purchaser.
E) The beneficiary cannot recover the shares from the purchaser and the bailor cannot recover the goods from the purchaser
C) The bailor can recover the goods from the purchaser but the beneficiary cannot recover the shares from the purchaser
(A bailor has a legal proprietary interest in the bailed goods. Generally, legal proprietary interests can be enforced against everyone. A beneficiary of a trust has an equitable proprietary interest in the trust property. Equitable proprietary interests can be enforced against everyone except a purchaser of a legal interest without notice)
Perpetuity rule for trusts with beneficiaries or charitable purposes as objects?
A) Rule against remoteness of vesting
B) Rule against inalienability
A) Rule against remoteness of vesting
Perpetuity rule for non-purpose charitable purpose trusts?
A) Rule against remoteness of vesting
B) Rule against inalienability
B) Rule against inalienability
Which of the following best describes the rule against remoteness of vesting?
A) The trust property must vest within the common law period of 21 years. It must be clear from the outset that the trust property will vest within that time
B) The trust property must vest within the statutory period of 125 years. It is possible to wait and see whether it vests in that time
C) The trust property must vest within the common law period of 125 years. It is possible to wait and see whether it vests in that time
D) The trust property must vest within the statutory period of 125 years. It must be clear from the outset that the trust property will vest within that time
E) The trust property must vest within the common law period of 21 years. It must be clear from the outset that the trust property will vest within that time. It is possible to wait and see whether it vests in that time
B) The trust property must vest within the statutory period of 125 years. It is possible to wait and see whether it vests in that time
What is the role of a trustee?
To manage trust property
Who is the settlor?
The creator of the trust
Who is the beneficiary?
The person who benefits from trust property
Description of a self-declaration of trust?
Settlor retains legal title to trust property but holds in capacity as trustee for third party
Description of a transfer on trust?
Settlor transfers legal title to trust property to hold on trust for a beneficiary
True or false: A settlor can be the beneficiary of a trust they create
A) True
B) False
A) True
(A settlor can become the beneficiary of a trust over property which they previously held as full legal owner. One way of doing this is to transfer property on trust to a third party trustee to hold on trust for the settlor)