BPP GDL Study Notes: Chapter 2

Question 1

How does a trust seperate ownership?

Answer 1

legal ownership to trustees

beneficial or equitable ownership to beneficiaries

Question 2

What interests subsist in a trust fund?

Answer 2

1. legal estate in the trustees

2. equitable interest in beneficiaries

Question 3

What are express private trusts?

Answer 3

• deliberately created by settlor
• for the benefit of individuals
• usually used for the protection and preservation of wealth

Question 4

What are charitable trusts?

Answer 4

• public trusts

- exist to promote a purpose

Question 5

What are implied trusts?

Answer 5

• trusts that are imposed by the law in certain circumstances
• can come into being regardless of the intentionsof the settlor

Question 6

How is a trust ‘express’?

Answer 6

if it is deliberately set up by the settlor or implied by his conduct

Question 7

What is a ‘resulting’ trust?

Answer 7

• the property results or returns to the owner

- might be because the settlor didn’t dispose of it fully or from some other mistake

Question 8

What is a ‘constructive’ trust?

Answer 8

• trust imposed by law in a number of situations
• used to remedy a fault or facilitate a transaction
• eg if A and B enter into a specifically enforceable contract they create a constructive trust

Question 9

What is a ‘statutory’ trust? Give an example.

Answer 9

• trust implied by statute
• eg the trusts that are formed on an intestacy which are governed by the Administration of Estates Act 1925, as anmended by the Trusts of Land and Appointment of Trustees Act 1996

Question 10

What is a ‘bare’ trust?

Answer 10

-where the beneficiary (or all the beneficiaries) are sui juris
AND
-the beneficiary (or all the beneficiaries) are absolutely entitled to the trust property

they may call for the trust property to be transfered to them under Saunders v Vaughtier 1841

Question 11

How is a trust ‘fixed’?

Answer 11

if the settlor has determined who the beneficiaries are and how much they will receive (ie the beneficial interests which each beneficiary will take)

Question 12

What is a ‘vested’ interest?

Answer 12

one that is unconditional and therefore exists immediately. Eg to T on trust for A for life remainder B absolutely. A has a vested life interest and B’s interest is “vested in interest”

Question 13

How else can a vested life interest be referred to?

Answer 13

the holder is “vested in possession”

Question 14

What is a ‘contingent’ interest?

Answer 14

an interest that is subject to the fulfilment of a condition which may or may not be met. eg “in remainder to B if he survives A”

Question 15

What is a discretionary trust?

Answer 15

• eg “to T on trust for such of my descendants as he shall select”
• one where the trustees have the discretion to decide a)whether to pay the income out b) to whom

Question 16

What kinds of discretionary trusts are there? What’s the difference?

Answer 16

exhaustive:

• trustees must pay out all income every year
• can only decide who gets it and in what proportions

or non-exhaustive

• trustees choose whether to pay out the income or accumulate it each year
• if they so choose, decide who to pay to and how much

Question 17

What is a ‘protective’ trust?

Answer 17

• initially, the principal benefactor has a life interest
• if he becomes bankrupt or attempts to dispose of his life interest in whole or in part, the life interest ends automatically
• life interest is then replaced by discretionary trust of the income for the rest of the beneficary’s life

Question 18

What rights and duties does a trust create?

Answer 18

• ongoing duties for the trustee to look after the property

- proprietary rights in the property and personal rights against the trustee (to enforce the terms) for the beneficiary

Question 19

What is a power of appointment and what else is it called?

Answer 19

• a ‘mere power’
• it is the authority to deal with someone else’s property
• gives complete discretion to decide who, within the named class of people, should benefit from the property and how much they get
• doesn’t have to be used or even considered

Question 20

What is a personal power?

Answer 20

a power of appointment given to someone who is not a trustee

Question 21

What is a fiduciary power?

Answer 21

a mere power given to a trustee

Question 22

What are the differences between trusts and powers?

Answer 22

1) exercise of trust powers is mandatory; no obligation to exercise mere powers
2) courts will enforce a trust but never compel the exercise of a power
3) objects of a fixed trust must be certain, but this isn’t the case at all for powers.
4) all the objects of a trust could collectively demand the trust property, as through Saunders v Vaughtier, unlike the objects of a power