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Question 1

What is a settlor?

Answer 1

The settlor is a person who sets up a trust in his lifetime.

Question 2

An express trust is a trust which is…

Answer 2

…set up intentionally by the settlor.

Question 3

Equitable interests are also known as…

Answer 3

…beneficial interests.

Question 4

Absolute owners have…

Answer 4

…legal title and equitable interest.

A trustee is not an absolute owner. Absolute ownership means outright ownership of the property in question. Where a trust exists, the trustee holds the legal title to the property but the equitable interest belongs to the beneficiary.

Question 5

The equitable interest gives beneficiaries two rights: personal and proprietary.
Beneficiaries have a personal right to enforce the trustees’ duties and to seek compensation for any breaches. It is called a ‘personal’ right because…

Answer 5

…it is enforceable against the trustees personally.

Question 6

The significance of the proprietary right is twofold:

(a) First, it can be enforced not only against the trustee, but also against…

Answer 6

…successors in title (ie people who subsequently get the legal title to the trust property).

Question 7

The significance of the proprietary right is twofold:
(b) Secondly, the proprietary nature of the beneficiary’s interest means that it is itself an item of property (just like shares in a company or money in a bank) which can be…

Answer 7

…sold or given away.

Question 8

Trusts can only exist over….

Answer 8

….property.

Question 9

Fixed trusts are…

Answer 9

…because the terms of the trust define the share of the trust property which the beneficiary will receive.

Question 10

‘On trust for X for life remainder to Y’.

This type of trust creates***** interests.

Answer 10

…successive interests.

Question 11

Sold Adult Beneficiary - A bare trust is where there is a sole adult beneficiary possessing full mental capacity who is…

Answer 11

…absolutely entitled (i.e. there are no limitations or conditions attached) The trustees must handle the trust property as the beneficiary dictates.

Question 12

Bare Trust - The stockbroker, as nominee, holds the legal title to the shares for the client. However, the client has a ** interest in those shares.

Answer 12

…a vested, in possession, absolute interest in those shares.

Question 13

A discretionary trust gives the trustees a discretion as to the amounts any beneficiary may receive and/or whether particular beneficiaries receive….

Answer 13

…anything at all.

Question 14

No individual has an equitable interest under a discretionary trust until the trustees exercise…

Answer 14

…their discretion in his favour. In the meantime, each individual just has a hope that the trustees will choose him or her.
Therefore, until such persons are allocated an interest by the trustees, they are called ‘objects’ rather than beneficiaries.

Question 15

In a discretionary trust, the beneficiaries have no actual ** interest in the trust fund, but they merely have a right to be considered as a potential beneficiary by the trustees.

Answer 15

…**proprietary.

Question 16

A beneficiary has a vested interest if that beneficiary is in existence and ….

Answer 16

…does not have to satisfy any conditions imposed by the terms of the trust before becoming entitled as of right to trust property.

Question 17

Death is not a contingent interest. Awaiting for someone to die can still mean the interest is ….

Answer 17

…vested. If a beneficiary has to wait for a death to occur – it is a postponement NOT a contingent interest. It will be in remainder if it is dependent on another beneficiary’s interest expiring – i.e. their death.

Question 18

Despite being under 18 (i.e. unable to give good receipt) an interest can still be ** if there is no contingency in place.

Answer 18

*** vested.

Question 19

A contingent interest is an interest conditional upon 2 things -

Answer 19

• either the happening of a future event, which may or may not happen or
• the beneficiary coming in to existence (i.e. a trust ‘for my grandchildren’).

Once a beneficiary satisfies the contingency or condition, the beneficiary’s interest is then said to be vested

Question 20

An example of a resulting trust is if the settlor does not provide for what should happen should a beneficiary never become entitled to the trust property – it will have to be…

Answer 20

…returned to the settlor.

Question 21

A beneficiary has an interest in possession if he can enjoy that interest immediately. A beneficiary has an interest in remainder if he cannot…

Answer 21

…enjoy it immediately but instead has to wait until some other beneficiary’s right to enjoyment expires.

Question 22

An absolute interest is an interest in the capital of the trust fund and this means that the beneficiary’s interest is not restricted to….

Answer 22

…trust income for a limited time.

Question 23

A limited interest is an interest only in the *** that is generated by investing the capital so it is an interest for a specified or a limited time.

Answer 23

***interest.

Question 24

If the beneficiary has a vested interest, her interest in the trust fund will form part of the estate and will pass in accordance with…

Answer 24

…her will or under the intestacy rules.

Question 25

If a beneficiary’s interest is not vested, it will fail. His interest will now be..

Answer 25

…shared between whoever else is in the trust who satisfy the contingency.

Question 26

If a beneficiary’s interest is vested and in possession and not limited in enjoyment, the beneficiary is described as ‘absolutely entitled’. At that point, a sole adult beneficiary can bring the trust to an end by asking the trustees to hand the whole trust fund over to him or to other trustees following…

Answer 26

…Saunders v Vautier.

Question 27

Following Saunders v Vautier, the beneficiaries can end the trust by calling for a transfer of trust property to themselves or to other trustees if all the beneficiaries under the trust who could possibly become entitled if they;

Answer 27

(a) are in existence (i.e. born) and ascertained;
(b) are 18 or older and of sound mind (sui juris); and
(c) are in agreement to end the trust fund and share out the assets.
‘All the beneficiaries under the trust who could possibly become entitled’ means that, between them, they must be absolutely entitled (ie there is no other person with a potential interest in the fund).

Question 28

As members of a class of discretionary trust beneficiaries, A, B and C do not have individual equitable interests. Consequently, the rule from Saunders v Vautier is arguably not available to them. However, there is authority, Re Smith (1928), suggesting that…

Answer 28

…between them they could own the whole of the equitable interest. Therefore, if they are over 18 and in agreement, they might be able to end the trust. However, this argument has not been developed or confirmed any further in cases since 1928.

Question 29

Constructive trusts arise in certain circumstances when it would be unconscionable for the legal owner of property to deny..

Answer 29

…the claimant an equitable interest.

Question 30

A person who makes a will is described as a…

Answer 30

…testator (testatrix if female).

Question 31

By s 9 of the Wills Act 1837, a will must normally be made in…

Answer 31

…writing and signed by the testator in the joint presence of two witnesses, who must then witness the testator’s signature by signing the will in his presence.

Question 32

If this were a clause in a will, Mary (recipient of gift in will) would be called the…

Answer 32

….legatee.

Question 33

If this were a lifetime gift, Mary would be called the..

Answer 33

…donee.

Question 34

If the testator did not own them, any paintings at his death, the gift has been ***

Answer 34

***adeemed.

Question 35

A lapsed specific or pecuniary gift falls into the residuary estate. A lapsed residuary gift passes under the…

Answer 35

…intestacy rules.

Question 36

If a will is witnessed by a beneficiary or a beneficiary’s husband, wife or civil partner, then the will is validly witnessed but the gift to the witness…

Answer 36

…fails (s15 Wills Act 1837).

Question 37

The intestacy rules apply…

Answer 37

.. to the whole estate if the deceased made no will at all,
or to his residuary estate if his will contains no residuary gift,
or if the residuary gift has failed or been revoked.

Question 38

If a person under 18 inherits property under in a will…

Answer 38

There are provisions, for example, the Children Act 1975, which broadly allow this money to be paid to Henrietta’s parents, so it is a possibility therefore that because she can’t give good receipt doesn’t mean she won’t get the money fairly immediately, it could go to her parents.

Question 39

If the child who has inherited property dies at 16 - she would still be entitled to the property if there is no condition attached to that (it is not contingent on her reaching a certain age). It is a vested interest. Therefore the money would go to..,.

Answer 39

….her estate. You need to be 18 to make a will so she will have died intestate.