Wills Trusts & SAC Flashcards
A settlor created a contingent trust for his three grandchildren, who have yet to satisfy the contingency. The settlor appointed his sister and his financial adviser as the trustees. There is no express provision in the declaration of trust that deals with the appointment of trustees. The trust assets comprise company shares and some cash.
The financial adviser trustee died 18 months ago. The other trustee, a retired nurse, relied on the financial adviser’s expertise in the management of the investments. She is now worried by the responsibility of trusteeship, especially as the beneficiaries have complained that the value of the trust fund has deteriorated.
Which of the following best describes how a new trustee can be appointed to assist the retired nurse in managing the trust’s investments?
A-Only the retired nurse has the power to appoint a new trustee, which must be done by deed to give the new trustee control over the trust investments.
B-The grandchildren can serve a written direction on the retired nurse requiring her to appoint a new trustee.
C-The appointment of a new trustee should be made by the personal representatives of the deceased financial adviser.
D-The retired nurse has the power to appoint a new trustee, but doing so by deed would not give the new trustee control over the trust investments.
E-The court could make an appointment only by application of the beneficiaries on the ground that the retired nurse is unwilling to make the appointment.
Option D is correct. The retired nurse as remaining trustee does have the power to appoint a new trustee, but using a deed to do so will not automatically vest title to the company shares, which comprise the trust assets, in the new trustee; separate stock transfer forms would need to be completed in addition.
Option A is wrong, partly because a deed will be insufficient by itself to vest control of the company shares in the new trustee, but also because it is not only the remaining trustee who has power to appoint a new trustee; it could be done by the court if it proved expedient to do so.
Option B is wrong. Section 19 of the Trusts of Land and Appointment of Trustees Act 1996 allows beneficiaries to serve a written direction on the retired nurse requiring the appointment of an additional trustee. However, this power is only available if the beneficiaries are of full age and capacity and taken together are absolutely entitled to the trust fund. Although the grandchildren might be of full age, none have yet satisfied the trust’s contingency, so they are not absolutely entitled to the trust fund.
Option C is wrong. The personal representatives of a deceased trustee only ever have power to appoint if was the last surviving trustee who had died, which is not the case here.
Option E is wrong because the court could make an appointment following an application by the retired nurse, as remaining trustee, as well as by the beneficiaries. The ground is not limited to the remaining trustee being unwilling to appoint. Instead, the court will make the appointment where it is expedient to do so and it is otherwise inexpedient, difficult or impractical to appoint without the court’s assistance.
S36 - appointment should be by deed, but assets in the trust are shares and don’t automatically get appointment by the deed so stock transfer form etc etc are needed so they have the assets in their name
A man is named as one of two executors in the valid will of a woman. The woman dies, survived by both executors. One week after the woman’s death, the man talks to his sister, who is a solicitor. He asks her to explain the role of an executor to him, as he is not sure he wants the responsibility. A week later he visits the woman’s house and collects a painting and a few ornaments which he later sells.
Which of the following best explains the man’s position as to being an executor?
A-The man must reserve power when the other executor applies for a grant of probate as he has intermeddled in the estate.
B-The man can renounce his right to act as executor, if he does not want to act.
C-The man may not be able to renounce his right to take the grant.
D-The man cannot reserve power as that will leave only one executor able to act.
E-The man cannot act as executor as he has interfered with the administration of the estate before probate has been granted.
Option C is correct. It is not possible to renounce the right to take the grant if the executor has intermeddled in the estate. Intermeddling includes doing any acts that an executor could do, such as selling the testator’s chattels.
Option A is wrong. Intermeddling does not prevent an executor applying for a grant of probate and so there would be no requirement to reserve power.
Option B is wrong as an executor cannot renounce if he has intermeddled in the estate, which seems to be the case on the facts.
Option D is wrong. Power can be reserved where there are two or more executors appointed, as is the case here.
Option E is wrong. Acting in the way an executor would act or dealing with administrative tasks does not prevent an executor applying for a grant. These are the sort of acts an executor will need to do in order to prepare to apply for the grant.
A man leaves £250,000 ‘to my Trustee on trust to build a library for use by the employees of my company’.
Is this a valid charitable purpose trust?
A-No, because the trust is not for a charitable purpose.
B-Yes, because the Attorney-General will enforce the terms of the trust.
C-No, because the trust is not exclusively charitable.
D-Yes, because the trust does not offend the rule against the inalienability of trust capital.
E-No, because the trust does not have a sufficient public benefit.
Option E is correct, as the trust would be for the advancement of education (as it is for the purpose of building a library), but the people who would benefit from this particular purpose are linked by a common employer, so the personal nexus test will apply. This means that there will not be sufficient public benefit for the trust to qualify as a charitable purpose trust.
Option A is wrong, as the trust will have a charitable purpose as it is for the advancement of education.
Option B is wrong, as the Attorney-General only enforces valid charitable purpose trusts. As this trust is not a valid charitable purpose trust, it will fail and will not be enforced by the Attorney-General.
Option C is wrong. The trust would be exclusively charitable because there is no political purpose to this trust, and no fees are being charged for use of the library.
Option D is wrong, as the rule against inalienability is only relevant for non-charitable purpose trusts. Charitable trusts are exempt from the rule against inalienability.
Charitable Trusts
-The prevention or relief of poverty.
-The advancement of religion.
-The advancement of education.
-The advancement of health or the saving of lives.
-The advancement of citizenship or community development.
-The advancement of the arts, culture, heritage or science.
-The advancement of amateur sport.
A personal representative (PR) asks for advice on who is entitled to a valuable painting which had belonged to the testator.
The painting was on loan to a local art gallery at the time of the testator’s death. Two months prior to the testator’s death he had written to the PR saying that when the painting was returned by the gallery he intended that the PR would hold the painting on trust for the testator’s grandson.
The testator’s will leaves his entire estate to a local charity.
Which of the following best describes who is entitled to the painting?
A-The grandson is beneficially entitled to the painting because there is written evidence of the testator’s intention.
B-The grandson is beneficially entitled to the painting as the trust is valid under the rule in Strong v Bird.
C-The charity is entitled to the painting as it was still owned by the testator at the time of his death and therefore formed part of his estate.
D-As the painting was on loan at the time of the testator’s death, it does not form part of his estate dealt with by his will and does not pass to the charity. It will therefore pass on intestacy when the loan ends.
E-The grandson is beneficially entitled to the painting as the letter is sufficient to transfer ownership of the painting to the PR as trustee notwithstanding the fact that it has not been physically delivered.
Option C is correct. In order to validly constitute a trust of a chattel such as a painting there must either be physical delivery to the trustee or a deed. The painting was never handed to the PR. A letter is not a deed. The transfer of legal title was therefore imperfect. The purported trust is not saved by any of the exceptions to the maxim that ‘equity will not assist a volunteer’. The ‘every effort’ test does not apply as there had been no delivery/deed. The rule in Strong v Bird does not apply as the intention to make a gift was a future intention (ie when the loan ends). Ownership of the painting therefore remained with the testator and it formed part of his estate on death.
Option A is wrong. The letter may have evidenced the testator’s intention, but is insufficient to constitute a trust over chattels.
Option B is wrong. The rule in Strong v Bird requires that the testator must have intended to create an immediate trust with the PR acting as trustee. The rule does not work to constitute the trust in this case as the testator’s intention was not to make an immediate trust, but one in the future.
Option D is wrong. The existence of the loan does not mean that the testator no longer owns the painting. It does form part of his estate on death and is subject to his will.
Option E is wrong as a letter is not a deed. A deed must be set out as a deed and should be signed and witnessed.
Strong v bird = can be a thing to happen in the future, intention has to be up until death…..:
The principle in Strong v Bird can also be used to complete an imperfect gift: if a person has a continuing intention to give, but does not complete the gift before death, then if the recipient is appointed as executor, legal title is vested in them by operation of law. This is sufficient to complete the gift.
It is October 2022. A woman died in March 2022 leaving her entire estate to an animal charity. The man she had been living with as her husband since June 2020 feels aggrieved because he has been left out from her will. He wishes to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the Act) and to apply for a benefit from the estate. The grant of representation was issued in May 2022.
Which of the following statements best explains whether the man can make a claim under the Act?
A-The man cannot make a claim because he had not been living with the deceased for a whole period of two years ending immediately before death.
B-The man cannot make a claim because whilst living as husband and wife immediately before death he was not being maintained by the deceased.
C-The man cannot bring a claim because the six months’ time limit for the application has expired.
D-The man can make a claim because immediately before death he and the woman lived as husband and wife in the same household.
E-The man can make a claim because they lived together as husband and wife for a whole period of six months ending immediately before death, and the time limit for application has not expired.
Option A is the correct answer. This is because the man and woman need to have lived as husband and wife in the same household for a whole period of two years ending immediately before death.
Option B is wrong because a claimant under the category of living as husband and wife need not be maintained by the deceased to bring a claim.
Option C is wrong because the time limit for the application has not yet expired. The time limit to bring a claim is six months from the date of issue of the grant of representation, not from the date of death.
Option D is wrong because it has ignored the time requirement for claimants in this category.
Option E is wrong because the period of time living together is two years, not six months.
A woman makes a valid will containing the following gifts:
-“My car” to her next-door neighbour.
-“My company shares” to her brother.
-“My jewellery” to a colleague from work.
-“My residuary estate” to her husband.
After making her will and before her death the following events occur:
-She sells her car and buys a replacement.
-Her brother dies. He is survived by a daughter (the woman’s niece).
-All her jewellery is stolen and she uses the insurance money to buy replacements.
-She divorces her husband.
The woman predeceases her father.
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Which of the following best describes who gets what property on the woman’s death?
A-The next door neighbour will get the replacement car, because the will speaks from the date of death.
B-The woman’s niece will get the company shares, because notwithstanding her brother’s death, the shares pass to his issue.
selected
C-The colleague from work will get the replacement jewellery, because this gift was of property capable of increase or decrease.
D-The ex-husband will be entitled to the residuary estate, because he is still alive on the woman’s death and she did not execute a codicil to remove the bequest.
E-The woman’s father will get all the property, because none of the gifts are effective and the father is entitled to the woman’s estate on intestacy.
Option C is correct. The woman has made a gift of ‘my jewellery’. As this is property capable of increase or decrease, the woman will be taken to have made a gift of any items satisfying the description at death.
Option A is wrong. The woman has made a gift of ‘my car’. As this is not property capable of increase or decrease, and as she specified ‘my car’ when making her will, the woman will usually be taken to have made a gift of the car she owned at the date of the will, ie she has shown an intention contrary to the usual rule in s 24 of the Wills Act 1837 that the assets which form the subject matter of a gift are determined at the date of death (this rule is often summarised in the saying that the will ‘speaks from the date of death’). As she no longer owns the car, this gift is said to be adeemed.
Option B is wrong. The gift of ‘my company shares’ has lapsed given that the brother has predeceased the woman. The gift does not pass to the niece as there is no express substitution clause in her favour and no implied substitution under s 33 of the Wills Act 1837 (which only applies to gifts to a testator’s children or remoter issue). BROTHER HAD TO SURVIVE THE SISTER, TO ALLOW FOR THE NIECE TO GET IT, HE DIED BEFORE SHE DID
Option D is wrong. The gift of the residuary estate to the husband fails because upon divorce, the property will pass as if the husband had predeceased the woman (ss 18A and 18C of the Wills Act 1837). The fact that the woman did not execute a codicil to this effect has no impact.
Option E is wrong. Given that the gift in option C is still effective, it is not the case that the father will get all the woman’s property on intestacy. However, as the bequest of the residuary estate has failed, there is a partial intestacy and the father is the statutory next-of-kin who will take that residuary estate (which will include the car and company shares).
A woman has been living with her partner in a property which is in her partner’s sole name.
Her partner bought the property eight years ago, using his savings of £50,000 and a mortgage of £300,000. The woman paid for the stamp duty land tax and legal costs.
For the past eight years, her partner has been responsible for the mortgage payments, although the woman did pay the mortgage for a period of 11 months whilst her partner was out of work. The woman also paid for a new kitchen and bathroom shortly after her partner purchased the property.
The woman and her partner have now separated. They had no written agreement relating to ownership of the property.
Will the woman be able to claim a share of the property?
A-No, because there is no written agreement relating to ownership of the property.
B-No, because the property is in the sole name of her partner and there was no express agreement concerning ownership of the property.
C-Yes, because common intention can be inferred from her payment of the stamp duty land tax and conveyancing fees when the property was purchased.
D-Yes, because common intention can be inferred from her payment of the mortgage instalments.
E-Yes, because the law will presume that the beneficial interest in the house is held in joint and equal shares.
Option D is correct. In order to establish a common intention constructive trust, a claimant must establish common intention (express or inferred) and detrimental reliance. According to Lloyds Bank v Rosset, common intention can be inferred from a direct contribution to the purchase price, or a significant contribution to mortgage payments. Here, the woman has paid the mortgage for a period of 11 months so, as long as the court considers that this constitutes a significant enough contribution to the mortgage, then a common intention constructive trust will have arisen. The payments will also satisfy the requirement for detrimental reliance.
Option A is wrong. Whilst it is true that there is nothing in writing relating to the ownership of the property, common intention constructive trusts do not need to be in writing.
Option B is wrong. Even though the property is in her partner’s sole name and there was no express agreement about ownership, the woman can establish an interest under an inferred common intention constructive trust (see feedback to option D).
Option C is wrong as the payment of costs ancillary to the purchase is generally not regarded as a contribution towards the purchase price itself, and so common intention is unlikely to be inferred from these payments.
Option E is wrong. The partner is the sole registered proprietor of the house. In this case, it will initially be presumed that the partner is the sole legal and beneficial owner of the property and the burden will be on the woman to establish that she has an interest in the house.
A woman died recently without having made a will. The woman had never been married, nor entered into a civil partnership. She made no lifetime gifts and had no debts. At the time of death the woman owned her home (valued at £500,000). In addition to her home, the woman had jewellery worth £125,000, a life insurance policy payable to the estate (which had a maturity value of £100,000 on death) and £250,000 worth of shares in Green Ltd, a family company that manufactures ski equipment. The woman had owned the shares for the past 20 years. The woman is survived by her 2 sons (aged 45 and 42). She had no other relatives. In the tax year of death the nil rate band is £325,000 and the residence nil rate band is £175,000.
Which of the following states the correct amount of IHT payable on the estate?
A-£0.
B-£50,000.
C-£90,000.
D-£190,000.
E-£160,000
Option C is correct. The estate consists of the house (£500,000) + life insurance policy (£100,000) + jewellery (£125,000) + shares in private limited company (£250,000) = £975,000. Business property relief applies to the shares (unquoted, trading company and owned for 2 years), leaving a taxable estate of £725,000. The residence is closely inherited by the 2 sons and therefore residence nil rate band will be available - so the first £175,000 is taxed at 0%. The full nil rate band of £325,000 will also be available as the woman made no lifetime gifts, leaving £225,000 x 40% = £90,000 tax.
Option A is wrong as it has incorrectly applied a transferred nil rate band as a deduction against the taxable estate (the woman had never married nor formed a civil partnership).
Option B is wrong as it has not included the insurance policy in the calculation of the estate for tax.
Option D is wrong as it has not applied business property relief.
Option E is wrong as it has not applied the residence nil rate band.
To look for:
-WATCH OUT FOR PENSION FUNDS AND LIFE INSURANCES BEING IN TRUST (they won’t be counted in IHT calculation)
ONLY INCLUDE THEM IF IT STATES ‘PAYABLE TO ESTATE’
- Possible charitable deduction (a percentage CHECKKKKKKKKK)*****:Any amount left in your will to charity is exempt from IHT and will reduce the total amount of your estate on which IHT is payable. Further to this, if you leave 10% or more of your estate to a qualifying charity or charities, the rate of IHT reduces from 40% to 36%.
-Business exemption as was in this case
-Transferable nil rate band from death of husband/wife
-Lineal descendants for residence nil rate band (so children, grandchildren etc) = if there is a spouse/ civil partner exemption it goes to the spouse and is not taxable, wouldn’t be lineal. Discount for cohabiters (check that)
-Tapering relief, only in PET or LCT
A testator signed his will with two witnesses present. The first witness signed in the presence of the testator but not in the presence of the second witness. The second witness signed in the presence of the first witness but not in the presence of the testator. The second witness then acknowledged his signature in the presence of the testator. The will contains an attestation clause.
The person appointed as executor in the will was present throughout the execution process. The testator has now died.
Which of the following best describes the ability of the executor to obtain a grant of probate of the will?
A-The executor is not able to obtain a grant of probate because the will was not validly executed.
B-The executor is able to obtain a grant of probate because the will was validly executed and raises a presumption of due execution.
selected
C-The executor is able to obtain a grant of probate by providing the Probate Registry with an affidavit of due execution.
D-The executor is able to obtain a grant of probate because he was present during the execution of the will.
E- The executor is not able to obtain a grant of probate because there has not been a court decision confirming the validity of the will.
Option B is the best answer. The will was validly executed in accordance with s9 Wills Act 1837. The testator signed in the presence of two witnesses as required. The first witness signed in the presence of the testator and the second witness acknowledged his signature in the presence of the testator. The witnesses do not have to sign in each other’s presence. The attestation clause (assuming that it is worded to confirm compliance with s9) raises a presumption that the will was validly executed.
Option A is wrong as the will was validly executed. The testator signed in the presence of two witnesses as required. The first witness signed in the presence of the testator and the second witness acknowledged his signature in the presence of the testator. The witnesses do not have to sign in each other’s presence.
Option C is not the best answer as an affidavit of due execution is unlikely to be needed due to the presumption of due execution raised by the attestation clause, assuming that it is worded to confirm compliance with s9 Wills Act 1837. Affidavits are required if there is no such presumption.
Option D is wrong because the presence of the executor when the will was executed is not relevant (as he was not acting as a witness).
Option E is wrong because the will was properly executed as the testator signed in the presence of two witnesses as required. The first witness signed in the presence of the testator and the second witness acknowledged his signature in the presence of the testator. The witnesses do not have to sign in each other’s presence. Therefore there is no need for a court case to prove the validity of the will.
A man owned a number of shares in a private limited company which he had set up many years ago. He transferred some of his shares to his daughter five years ago by executing a stock transfer form and sent this along with his share certificate to the company. His daughter was duly registered as the new owner of those shares and the man retained the remaining shares. There was no apparent explanation at the time as to why the man did this but the daughter did start working in the company on a part time basis. Two years ago, he made a valid will leaving all his shares in the company (including those gifted to his daughter previously) to his godson. At the time he made the will, he indicated to the godson that he never meant to transfer the shares to his daughter and that it was a temporary arrangement. The man died last month and the godson is claiming all the shares.
Which of the following statements best describes who will be entitled to the shares gifted to the daughter five years ago?
A-The daughter will be entitled to the shares because she started working in the company and it can be inferred from this that the father intended her to have them.
B-The daughter will be entitled to the shares because they were transferred using the correct transfer formalities for private limited company shares.
C-The daughter will be entitled to the shares because the law will irrebuttably presume that a gift of the shares was made to her by her father.
D-The daughter will be entitled to the shares because the law will rebuttably presume that a gift was made; neither the father’s will nor the conversation with his godson are sufficient to rebut that presumption.
E-The daughter will be entitled to the shares because the transfer to her preceded the making of the will and the conversation with the godson.
Option D is correct. In the absence of any clear stated intention, the law will presume that a gift was made to the daughter (presumption of advancement). Whilst it is possible for the godson to rebut this presumption, any evidence adduced of contrary intention must have been at the time of, or so shortly afterwards so as to form part of, the transaction. The will and the conversation (indicating that the man still saw himself as owner of the shares) were made two years later, so will be insufficient to rebut the presumption of a gift; the daughter will be entitled to the shares.
Option A is wrong as, there is no legal basis for inferring from the daughter working for the company that the transfer of shares was intended as a gift.
Option B is wrong, as, whilst the shares have been correctly transferred to the daughter, this only determines that the daughter holds the legal title in the shares. It does not assist in identifying whether the beneficial interest in those shares also transferred to the daughter.
Option C is wrong. In transfers from father to child, there is a presumption that the father intended to gift the transferred property to the child. However, that presumption is rebuttable.
Option E is wrong as, whilst the transfer of the shares to the daughter preceded the making of the will, this is not the reason why the daughter will be entitled to them in law.
A solicitor is advising a trustee on the validity of certain dispositions in a will.
One clause reads:
“£5000 to be shared amongst such of my golfing buddies in such shares as my trustees shall decide”
Is this a valid declaration of trust?
A-No, because the term ‘golfing buddies’ lacks conceptual certainty.
B-No, because it is not possible to draw up a complete list of all of the testator’s golfing buddies.
C-No, because the golfing buddies must be named in the will.
D-Yes, because the trustees have the ability to make the final decision as to who meets the description of ‘golfing buddies’ and can therefore resolve any uncertainty.
E-Yes, because this is a discretionary trust and is not administratively unworkable.
Option A is the best answer. The trust is a discretionary trust and the class of potential objects must comply with the given postulant test which requires conceptual certainty. The term ‘buddies’ has no settled/defined meaning.
Option B is wrong as this sets out the certainty of objects test for a fixed interest trust. Here there is no requirement for equal division and this trust is discretionary not fixed.
Option C is not the best answer. It is true that naming the golf buddies would have resolved any issue of uncertainty but this is not a requirement for validity.
Option D is wrong. In a discretionary trust, the trustees’ discretion relates to how trust property should be distributed to people within the class of objects. They have no discretion as to who falls within the class of objects.
Option E is not the best answer. Whilst it does identify the nature of the disposition (a discretionary trust) and correctly identifies that the disposition is unlikely to be administratively unworkable, the trust fails due to lack of certainty of objects.
A man dies leaving a will which contains no express administration provisions. His will leaves a house worth approximately £500,000 and paintings worth approximately £2,000 to his son, a pecuniary legacy of £5,000 to his nephew, and the residue on trust in equal shares for his three grandchildren (all of whom are minors at the date of death). The estate includes the house and paintings and also bank accounts of approximately £40,000, a car worth approximately £3,000 and antiques worth approximately £5,000.
Prior to distribution of the estate, the nephew asks the executors if he can have the car as part of the legacy bequeathed to him.
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Which of the following best states the action the executors can take?
A-The executors have authority to let the nephew take the antiques from the estate instead of cash, but not the car, as the antiques match the full value of his pecuniary legacy under the terms of the will.
B-The executors have authority to let the nephew take any of the assets within the estate, up to the value of his pecuniary legacy.
C-The executors have authority to let the nephew take the car if they obtain the formal consent of the trustees of the residue, on behalf of the grandchildren, as the car forms part of the residue.
D-The executors have authority to let the nephew take the car if they obtain the formal consent of all beneficiaries of the estate, including the parents or guardians on behalf of the grandchildren.
E-The executors have authority to let the nephew take the car, with his consent.
Option E is the best answer. Under s41 Administration of Estates Act 1925 (which has not been excluded or revised on the facts) where a will provides for a pecuniary legacy to a beneficiary, the executors may allow that beneficiary to take chattels or other assets in the estate up to the value of the legacy, provided these assets have not been specifically bequeathed by the will. The car has not been specifically bequeathed and as the request for the appropriation has come from the nephew, he is consenting.
Option A is wrong as the value of the chattel or other asset does not have to match the full amount of the pecuniary legacy, so the car could be a partial appropriation with a balancing payment of £2,000 to satisfy the legacy. The appropriation would also require the nephew’s consent.
Option B is wrong as although the power to appropriate assets lies with the executors, it does require the pecuniary legatee’s consent for the appropriation to take place, and also the paintings have been specifically bequeathed and so could not be the subject of appropriation.
Option C is wrong as the power to appropriate assets lies with the executors, and the residuary beneficiaries’ consent is not required as the appropriation would not prejudice any specific beneficiary. Further, even if the residuary beneficiaries’ consent were needed, it would be the parents or guardians on behalf of the minor grandchildren, and not the trustees, who would provide that consent.
Option D is not the best answer as the power to appropriate assets lies with the executors and whilst the other beneficiaries may be consulted, their formal consent is not required.
12 months ago, a trustee withdrew £10,000 in cash from the trust account and bought an electric bike for £3,000, which she handed to her son on his 18th birthday. He still has the bike which he relies on to get him to and from work.
She spent the balance at an auction on a painting, now valued at £14,000.
The trustee has recently been declared bankrupt.
Which of the following is the best advice to give the beneficiary as to the type of claims to make and against whom such claims should be brought?
A-She should bring a proprietary claim against the trustee for the painting representing a clean substitution, but the court will determine whether a lien or a proportionate share is granted. A personal claim against the son is unlikely to succeed, but a proprietary claim is viable.
B-She should not bring any claims against the trustee who is now bankrupt, because any claim brought ranks alongside other creditor claims. A personal claim against the son is unlikely to succeed, but a proprietary claim is viable.
C-She should bring a proprietary claim against the trustee for breach of trust and fiduciary duty for the painting representing a clean substitution. A personal claim against the son is unlikely to succeed, but a proprietary claim is viable.
D-She should bring personal and proprietary claims against the trustee for breach of trust and fiduciary duty. A personal claim against the son is unlikely to succeed, but a proprietary claim is viable.
E-She should bring a proprietary claim against the trustee for breach of trust and fiduciary duty for the painting representing a clean substitution. Neither personal nor proprietary claims against the son are viable, as his conscience is clear.
Option C is correct. There is no point in the beneficiary bringing a personal claim against the trustee, who is bankrupt (and therefore is unlikely to be able to meet any judgment awarded against her). The beneficiary, however, can bring a proprietary claim to recover the painting as this represents trust property having been cleanly substituted for trust money wrongly appropriated.
A personal claim is unlikely to succeed against the son because his state of mind was not such as to make it unconscionable that he accepted and retained the bike to help him get to work. However, a proprietary claim to recover the bike is possible because the son did not provide valuable consideration in exchange.
Option A is wrong for stating that the court will determine whether to grant a lien or proportionate share against the painting. As this is a case of clean substitution (and the painting has increased in value), the beneficiary will be entitled to recover the painting in its entirety.
Option B is wrong for stating that no claims can be brought against the trustee. Proprietary claims will not rank alongside other creditor claims, but in priority to those claims.
Option D is not the best answer as there is no practical point in bringing a personal claim against the trustee. Given her bankruptcy, she is unlikely to have the funds available to meet such a claim.
Option E is wrong. Whilst the son’s ‘clear conscience’ will defeat a personal claim for recipient liability, it will not defeat a proprietary claim. (To defeat a proprietary claim, the son would in essence needed to have had a ‘clear conscience’ and have provided valuable consideration.)
A trust is settled by a settlor. The settlor appoints a trustee but the trust deed does not provide for any remuneration or other financial benefit for the trustee’s work in administering the trust.
The trustee, in good faith, invests half of the trust property in her employer’s business. As a thank you, the employer pays the trustee £100. The investment doubles the value of the trust property.
What should the trustee do with the £100?
A-The trustee may keep the £100 because the investment has been profitable.
B-The trustee may keep the £100 because she does not earn any other remuneration from her duties as a trustee.
C-The trustee may keep the £100 because she acted in good faith in making the investment.
D-The trustee must account to the trust for the £100 because she had a prior professional relationship with the employer.
E-The trustee must account to the trust for the £100 because it is an unauthorised commission.
Option E is correct because the trustee has breached her fiduciary duty not to put her interests in conflict with those of the trust. The £100 is a prohibited commission payment. The trust deed does not permit her to receive this kind of payment. She must therefore account to the trust.
Option A is wrong because the trustee is in breach of her fiduciary duty by earning the commission payment. She must account to the trust. It is irrelevant that the investment was profitable.
Option B is wrong. The trustee could keep the £100 if the trust deed permitted a payment of this kind. As the trust deed is silent on the trustee’s remuneration, the trustee may not keep the commission payment.
Option C is wrong because the trustee is in breach of her fiduciary duty by earning the commission payment. She must account to the trust. It is irrelevant that she acted in good faith.
Option D is wrong because the trustee is in breach of her fiduciary duty by earning the commission payment. She must account to the trust. It is irrelevant that she had a prior relationship with the employer.
A solicitor has issued a bill to a client for legal services. The bill includes an item for its professional charges and VAT on those charges.
Which statement most accurately describes the correct position in relation to accounting entries for professional charges?
A-An entry will be made in the firm’s cash account as there is a movement of cash when the bill is issued.
B-The client ledger account must be recorded with a credit entry for professional charges and VAT.
C-The debit entries on the client ledger account must be made in the business section.
D-The income ledger account must be called “professional charges”.
E-At the end of the year, the balance on the profit costs account will show the amount the firm has received from the clients who have been billed.
Option C is correct because the purpose of the debit entries appearing on the client ledger are to show that clients of the firm owe money to the firm.
Option A is wrong because the issuing of a bill does not indicate a movement of money and so no entry should be recorded on the cash account.
Option B is wrong because the correct entry is a debit entry.
Option D is wrong because the income ledger account need not be called “professional charges”. It can be called “professional fees” or traditionally it is called “profit costs”.
Option E is wrong because the end of year balance on the profit costs account shows the amount that the firm has billed for professional charges, not fees received from clients.
