Term
| What are the two main types of trusts? |
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Definition
Express trusts
Implied trusts |
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Term
| What are the three main types of express trusts? |
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Definition
Trusts for people - most common
Charitable purpose trusts
Private purpose trusts |
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Term
| What three things do all express trusts require? |
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Definition
1) The 3 certainties
2) Formalities
3) Constitution |
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Term
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Definition
| Trusts which are implied my law - in many cases, despite the intentions of the settlor |
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Term
| What are the two main types of implied trusts? |
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Definition
Resulting trusts - all about trying to give effect to the intentions of the settlor (occur when the property returns to the settlor e.g. because he failed to create a successful express trust & therefore failed to dispose of property fully)
Constructive trusts - usually imposed to prevent unconscionable conduct (imposed by the law, generally to remedy some fault, or facilitate a transaction or an event) |
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Term
| Do implied trusts have to meet the same requirements as express trusts? |
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Definition
| NO - as they are implied by the law |
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Term
| What is a 'transfer on trust'? |
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Definition
| It is a way of creating an express trust. Where the settlor and trustee are two different people, therefore, in order to create the trust, legal title TRANSFERS from the settlor to the trustee. |
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Term
| What is a 'self declaration of trust'? |
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Definition
| A way of creating an express trust. The settlor declares themself as the trustee for the beneficiary. Self-declaration as settlor is declaring themself as the trustee. (Advantage = no need to transfer legal title + don't have to pay someone to be a trustee) |
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Term
| What are the two main ways in which express trusts can be created? |
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Definition
1) A transfer on trust
2) A self declaration of trust |
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Term
| What happens at the moment a trust is declared? |
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Definition
| The settlor can no longer treat the property as his own, it is now subject to the trust. |
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Term
| If someone creates a trust for multiple beneficiaries, but fails to specify how much each beneficiary will get, what will happen? |
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Definition
The equitable maxim - 'equity is equality...
Each beneficiary will receive equal shares in the absence of any express term stating otherwise. |
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Term
| If a trust = 'To charlie for life and remainder to Donna'... what happens? |
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Definition
| The property is Charlie's for the rest of his life. Upon his death, it will then go to Donna. |
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Term
| If a trust = 'To charlie for life and remainder to Donna'... what kind of interest does Charlie have? |
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Definition
| Charlie will have a life interest. |
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Term
| Can you be both the settlor and a beneficiary under the trust? |
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Definition
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Term
| If you wanted to avoid inheritance tax, could you make a trust where you and your children would be beneficiaries? e.g. To me for life, remainder to children? |
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Definition
| NO - tax man will see through it. If you want to avoid inheritance tax, you have to cut off all ties with the property. |
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Term
| What is a vested interest? |
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Definition
| An unconditional right to benefit - absolutely certain to benefit e.g. 'to B for life' |
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Term
| What is a contingent interest? |
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Definition
| A right that depends on the occurence of an uncertain event. e.g. 'To B if he marries' |
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Term
| 'To A for life' - what type of interest does A have? |
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Definition
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Term
| 'To B if he marries' - what type of interest does A have? |
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Definition
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Term
| 'To C on my death' - what type of interest does A have? |
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Definition
| Vested (even if C dies first, C's estate will get the property) |
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Term
| 'To D if he attains age 18' - what type of interest does A have? |
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Definition
| Contingent (If D dies before 18, his estate will get nothing, as D hasn't satisfied the requirements to acquire the property) |
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Term
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Definition
E = Vested
F = Vested (even if F dies before E, his estate will benefit - nothing in it which says F has to survive E) |
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Term
| What is the magic word which helps identify contingent interests? |
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Definition
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Term
| 'To E for life, then F' - what type of interest does E have? |
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Definition
LIFE TENANT
E's interest/right is vested in posession.
Life interest. Right to current enjoyment. E = life tenant & receives income from the property (NOTE - no absolute ownership E is only the life tenant) |
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Term
| 'To E for life, then F' - what type of interest does F have? |
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Definition
REMAINDERMAN
Vested interest. Current right to FUTURE enjoyment. F = REMAINDERMAN - becomes absolutely entitled on E's death. |
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Term
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Definition
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Term
| What does the life tenant of a property receive? |
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Definition
| The income from the property |
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Term
| What does the remainderman receive? |
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Definition
| EVERYTHING after the life tenant dies |
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Term
| 'To E for life, then F' - w.r.t the 'capital' of the trust? |
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Definition
| Whilst E is alive, neither party can spend the capital of the trust. E can't spend the capital, as that will prejudice F's remainderidge. F can't spend the capital whilst E is alive, because that will prejudice E's income. E can only receive the income from the property. When E dies, F will then own the property absolutely, and can spend the capital however he wants. |
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Term
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Definition
| Bare trusts exist where a beneficiary who is sui juris is absolutely entitled to the trust property - or where there are several beneficiaries, all sui juris, who are together absolutely entitled. |
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Term
| Where there exists a bare trust, what can happen? |
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Definition
| The beneficiary/ies may call for the trust property to be transferred to them. |
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Term
| Under what authority can the beneficiary of a bare trust call for the property to be transferred to them? |
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Definition
| Saunders v Vautier [1841] |
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Term
| Saunders v Vautier [1841] |
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Definition
BENEFICIARY/IES OF A BARE TRUST MAY CALL FOR THE PROPERTY TO BE TRANSFERRED TO THEM.
ABSOLUTELY ENTITLED BENEFICIARIES OF A TRUST CAN DO AS THEY DESIRE WITH THE PROPERTY, EVEN IF THAT WAS CLEARLY NOT THE INTENTION OF THE SETTLOR
ONCE THE BENEFICIARY IS OF FULL AGE AND CAPACITY THE TERMS OF THE TRUST SHOULD BE SECONDARY TO THE LAW'S TREATMENT OF PEOPLE AS AUTONOMOUS ADULTS. THE LAW OF TRUSTS SHOULD NOT, THEREFORE, TREAT SOME ADUYLTS AS IF THEY WERE CHILDREN.
Mr Right left stocks to be held on trust for Vautier until he was 25.
When Vautier was 21 (age of majority at the time), he applied to receive the stocks
HELD - Vautier became entitled to the property as soon as he was an adult and as long as he was of full mental capacity
(Sanders = trustee) |
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Term
| Multiple beneficiaries of a bare trust can call for the trust property to be transferred to them. However, what must they all do before this can happen? |
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Definition
| Agree - Curtis v Luken [1842] |
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Term
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Definition
| MULTIPLE BENEFICIARIES TO A BARE TRUST CAN CALL FOR THE PROPERTY TO BE TRANSFERRED TO THEM, BUT ONLY IF ALL BENEFICIARIES AGREE |
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Term
| Which case confirms that the rule in Saunders v Vautier is applicable to bare trusts with multiple beneficiaries? |
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Definition
| Curtis v Luken [1842] - but only if all the beneficiaries agree |
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Term
| If you have a discretionary trust with multiple beneficiaries, can the rule in Saunders v Vautier be used? |
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Definition
Uncertainty.
Re Smith = yes
Gartside v IRC = NO |
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Term
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Definition
YES - DISCRETIONARY BENEFICIARIES CAN DEMAND THE COLLAPSE OF A TRUST
Although the trustee had discretion w.r.t which of the children received & how much each beneficiary received... because all the beneficiaries had grouped together and agreed, the trustee could not refuse to hand over the money. |
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Term
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Definition
NO - DISCRETIONARY BENEFICIARIES CANNOT DEMAND THE COLLAPSE OF A TRUST
Potential beneficiaries of a discretionay trust have no proprietary interes in the trust property until selected by the trustees. Until selection, the beneficial interest is in suspence. |
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Term
| How does the trustee collapse the trust? |
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Definition
| By transferring the legal title to the beneficiary... so the beneficiary now holds legal and beneficial title & the trust collapses & trustee is no longer involved. |
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Term
| What is a discretionary trust? |
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Definition
A trust will be given a discretion. Usually as to (a) whether to pay the income out and, if so, (b) to whom...
Settlor will define a class of potential beneficiaries. |
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Term
| What is an exhaustive discretionary trust? |
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Definition
A discretionary trust is exhaustive if the trustees are obliged to pay out all of the income each year... therefore the trustee only has 2 discretions:
a) to whom to pay the money to
b) how much to pay to each person |
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Term
| What is a non-exhaustive discretionary trust? |
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Definition
| A non-exhaustive discretionary trust is one where the trustee is not obliged to pay out all of the income each year, and instead has the power to accumulate income. |
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Term
| What is a protective trust? |
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Definition
| A protective trust is one where the principal beneficiary has a life interest, however, if he becomes bankrupt or attempts to assign his life interest, in whole or in part, the life interest automatically ends and is replaced by a discretionary trust for the rest of the principal beneficiaries life... (used to protect wasterels) |
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Term
| What is a power of appointment? |
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Definition
| It is something which looks very similar to a discretionary trust, but is actually very different. A power of appointment is an AUTHORITY to deal with somebody else's property, but exercise of that power is at the holders discretion. e.g. '£300 to such of X, Y and Z as D may select, and if no selection is made, to A'. |
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Term
| What are the key differences between a power of appointment and a discretionary trust? |
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Definition
1) Trust = shall, Powers = may
2)Trust = settlor, Powers = Donor
3) Trust = Trustee, Powers = Donee
4) Trust = Beneficiaries, Powers = Objects
5) Trust = Courts will enforce a trust, Powers = courts will only restrain improper use (the courts will never compel the exercise of a power)
6) Trusts = need a certain class of beneficiaries, you must be able to draw up a conclusive & exhaustive list of potential beneficiaries, powers = do not require this certainty, you just need to be able to say if someone is in or out.
7) All beneficiaries of a trust can get together and compel it's collapse (not necessarily for discretionary ones though)... the potential objects of a power cannot compel it's exercise. |
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