UK Contract and Trust Legislation (2/80) Flashcards
(30 cards)
What is the capacity to contract?
This is a legal term which means that someone has the power in law to enter into a contract; if they do not have capacity to contract, the contract may be either Void or Voidable
What role do IFAs play in any transactions for their clients?
They act as “Agents” of the client. In some cases, wher ethe IFA is tied to a provide,r they may act as Agent of the provider.
What is Limited Liability?
Its owners cannot – except in very few circumstances – be found liable for the company’s debts; their liability is limited to what they paid for their shares, hence most companies have the term limited in their title.
What is the difference btween a Partnership and a LLC?
A partnership is not a separate legal entity like a company, and, with some kinds of partnership, the partners remain fully liable for the partnership debts.
What is the diofference between dying Testate or Intestate?
Testate means with a will which manages the assets. Intestate means administrators will divide the assets.
What are the two types of property?
- real property, and
* personal property.
What are the types of joint ownership?
- a joint tenancy, or
* tenants in common.
What is the difference bteween joint tenancy and tenants in common?
Joint Tenants each have an identicle interest. If one dies, the other owns it all. Tenants in common each own a seperate share and this can be passed to others.
What are the cirumstances where an individual cannot be bankrupt?
- Upon death
- Infancy
- Mental incapability
What are the ways a bankruptcy order can be made?
• Debtor’s petition – the debtor may apply voluntarily to the courts for a bankruptcy order. They
may do this because, while the process is unpleasant, it gives them the opportunity to put their debt
problems behind them and begin again.
• Creditor’s petition – one or more of the individual’s creditors can petition the courts for an
enforcement order.
What is the difference between Bankruptcy and insolvency?
Companies become Insolvent, Individuals become Bankrupt
How might a company address Insolvency?
- Liquidation
- Informal Arrangements
- Company Voluntary Arrangement
- Administration
Why might you use a Trust?
• To ensure that the financial needs of the settlor’s family will be provided for after they die.
• To minimise the tax burden on the settlor’s estate on their death, perhaps by taking a gift out of the
settlor’s estate now while retaining the ability to decide exactly who will get what at a later stage.
• To make gifts for the benefit of people who may not be old enough, or sensible enough, to handle
them at the outset.
• To make a gift of income to one individual, while reserving the capital for the benefit of someone
else, after the income beneficiary’s death.
What must a Trust Deed include?
The deed will specify the: • trust property • names of the trustees • names of the beneficiaries • name of the protector (if there is one) • powers of the trustees • rights of the beneficiaries.
What is a Will Trust?
A trust can be expressly stated in a will or arise because of a gift to a minor. Even if the will does not
include provisions to set up a trust, the executors are effectively holding the entire estate on trust for
the beneficiaries until they can fully distribute it.
What are the 3 Certainties required for a Valid Trust?
Certainty of intention (what do you intend)
Certainty of object (who is it for)
Certainty of subject matter (what is in it)
What is the Settlor of a Trust?
The settlor is the person who sets up the trust by transferring money or other property to trustees to
hold upon the terms of the trust they are seeking to establish.
Who are the Trustees of a Trust?
The trustees are the legal owners of the trust property and on appointment the property will be vested
in them by the settlor. This process is known as constituting the trust.
What are the duties of Trustees?
• To comply with the terms of the trust – the trustee must be familiar with the terms of the trust and
comply with the duties and powers contained in the trust instrument.
• To take control of the trust property – the trustee must ascertain the assets of the trust and ensure
these are vested in the names of the trustees.
• To act impartially between the beneficiaries – trustees must act in the best interests of the
beneficiaries but, importantly, must also act impartially between all the beneficiaries.
• Duty to keep accounts – a trustee must keep clear and accurate accounts of the trust, and provide
them to beneficiaries on request.
• Duty to provide information – a trustee must produce information and documents on request of
the beneficiaries.
• Duty of care – in addition to the above general duties, there has always existed an overarching duty
of care which covers all the actions of a trustee.
Can trustees delegate their powers?
Yes, to an Agent
Who are the Beneficiaries of a Trust?
The beneficiaries are the persons or objects for whose benefit the trust is created.
What are the types of Beneficiary for a Trust?
• Absolute vested interest – the beneficiary has a full equitable ownership, which cannot be taken
away.
• Life interest – a beneficiary (called the life tenant) is entitled to the income on the trust property
but not the capital.
• Remaindermen – these beneficiaries will receive the capital of the trust fund on the death of the
life tenant
What is a Protector a trust?
They make decisions and other powers given to them in the Trust Document, however they do not legally hold the Trust assets, unlike the Trustee
What is a Bare Trust?
A bare trust is when the trustee holds the trust property for a single beneficiary who is of full age and
mental capacity.
