types of express trusts

Question 1

creating an express trust

Answer 1

• Natural persons can create a trust:
  
  • on death by will; the creator is the testator/ testatrix
  • during their lifetime, inter vivos; the creator is the settlor
• by disposition or self-decleration

Question 2

Fixed trust

Answer 2

• a trust where the stellor has fixed the beneficial interests which each beneficiary is to recieve
• e.g £10k to Bobby on trust for my two children, Ant and Dec, in equal shares
  
  • trustee has no discretion
  • interests are concurrent
• e.g 66 High Street to Bobby on trust for life, and remainder to Ant
  
  • succesive trust
  • interests are fixed at the date the trust is created. INterests are succesive
  • both interests are vested
    
    • interests vested in possession (present right to present enjoyment -> Bobby)
    • interests vested in interest (present right to future enjoyment -> Ant)
  • vested vs contingent
    
    • contingent interest = beneficiary has to meet a condition (such as surviving to a certain age, or surviving another beneficiary). The interest becomes a vested interest once the beneficiary meets that condition.
    • vested interest = the beneficiary does not have to meet any conditions for that interest to take effect

Question 3

Discretionary trust

Answer 3

• a trust where the trustee is given a discretion under the terms of which they should exercise for the class of beneficiaries
• the discretion is threefold: whether the capital or income should be paid oit and, if so, how much and to whom it should be paid
  
  • e.g £10k on trust to Bobby. Bobby (if he chooses) can distribute between such of my sisters as he, in his absolute discretion, shall determine
• non-exhaustive discretionary trust: you can choose not to distribute. Don’t have to exhaust (give out) the funds
• exhaustive discretionary trust: you have discretion but must pay out the funds
• historically referred to as spendthrift trust or portective trust
• Willberforce uses the term ‘trust powers’ in Mcphail v Doulton
• Trust without an interest in possession; interest is not vested

Question 4

massively discretionary trust

Answer 4

• trust structure in which the trustee’s dispositive discretions do not merely qualify the beneficial interests, but effectively displace them. One might even say overwhelm them
• Coined by Lionel Smith
• Trustee is given the power of distribution over income and capital among objects
  
  • Trustee is given the power to add or remove objects (no uncertainty of objects here)
  • Trustee is given the power to transfer assets that make up the trust fund to new settlements

Question 5

Accumulation and maintenance trust

Answer 5

• Income is the sum which is generated from the trust fund. Rent generated from a house. Alternatively, if the trust fund consists of shares, then the income would be dividends
• Capital is what comprises the trust find. It might be a sum of money deposited with a bank, or house, or shares, etc
• Trustees may decide whether to accumulate income or to distribute it. If they decide to distribute it, they may decide when to pay out income and how much. They may also have discretion over advancing capital to a beneficiary or changing the beneficiaries shares before the vesting date ( the date on which they become entitled to capital or an interest of possession)
• Enjoyed privileged inheritance tax treatment between 1975-2006

Question 6

Bare Trust

Answer 6

• Trustee holds asset subject to a trust for a single beneficiary without conditions or qualifications
• Also called a holding trust, or nominee ownership
• e.g Ant buys 100 shares in Apple but registers them in Dee’s name. This sets up a presumption of a resulting trust
• Originally for dodgy reasons, but over lat 50 years it has become normal for shareholdings to be nominally owned by stockbrokers on trust for the real purchaser
• Often used in commercial contexts