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Equity and Trusts problem question plans
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- Equity And Trusts
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- University Of Law (ULaw)
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EQUITY AND TRUSTS PROBLEM QS AND ESSAY QSFixed trust alternatively known as “an interest in possession” trust,
is one where the interests of the beneficiary or
beneficiaries are determined at the outset. The trustee
must distribute the trust rights in accordance with the trust.
Discretionary A discretionary trust gives trustees the power to decide
trust how much beneficiaries get from a trust and when they
get it. All capital and income is distributed completely at their
discretion. This means there's more flexibility and assets can
be protected if circumstances change for any reason.
Express trust a trust created "in express terms, and usually in writing,
as distinguished from one inferred by the law from the
conduct or dealings of the parties." Property is transferred
by a person (called a trustor, settlor, or grantor) to a
transferee (called the trustee)
Implied trust a trust that is imposed by law in certain situations,
usually by presuming an intention of the parties to create
a trust.
Constructive A trust that arises by operation of law where it would be
trust (implied) unconscionable for a person (A) who holds an asset to
deny the beneficial interest of another person in the
asset. For example, a constructive trust may arise where: A
holds funds that he knows have been paid to him by mistake.
Resulting trust A resulting trust is an implied trust that comes into existence
by operation of law, where property is transferred to
someone who pays nothing for it; and then is implied to have
held the property for benefit of another person. The trust
property is said to "result" or jump back to the transferor
(implied settlor).
Purpose trust a type of trust which has no beneficiaries, but instead
exists for advancing some non-charitable purpose of
some kind.
Gift Generally trusts are used as they allow the settlor a
degree of control over how the property is to be used
whereas gifts are used when no control over the asset is
required.
,Advise what trust would be useful for your
client and what type of beneficial interest
would be available
1. Define what a trust is and how it is useful + apply to facts
Definition - there is a binding obligation placed on a person - a ‘trustee’; to look after
property for the benefit of another - a ‘beneficiary’ - or for a purpose permitted by law
(Keeting and Sheridan, The Law of Trusts, 12th edn, 1994)
Usefulness - A trust allows the separation of control of property from its enjoyment and use.
The trustee has management and control of the property subject to the trust (the ‘trust
property’), but the beneficiary is the ‘real’ owner in the sense that he enjoys the benefit of
the property
EXAMPLE Gerald (‘Settlor’) transfers £100,000. Tara (‘Trustee’) holds on trust for Sally (‘Beneficiary’)
2. Identify the wishes of your client?
3. Apply the facts to each trust
Fixed DISCRETIONAR Creation of Creation Resulting Constructive
Trusts Y TRUSTS trusts in of trusts trusts
settlor’s by will
lifetime
The terms gives the trustees a Settlors Resulting when it would
of the discretion as to the can trusts are be
trust amounts any (a) Settlor create implied in unconscionabl
define the beneficiary may declares self trusts in certain e for the legal
share of receive and/or as the their defined owner of
the trust whether particular trustee. wills situations property to
property beneficiaries (see deny the
which the receive anything at (b) Settlor para 4 An claimant an
beneficiar all. transfers below). example is equitable
y will property to The where interest.
receive. A discretionary trustees on settlor is there is a
trust allows the trust. then gap in the For example,
Fixed trustees to respond called a beneficial say that Gary
trusts to changes in *‘From now ‘testator ownership buys a house
include circumstances on, I am going ’ (or . Say that in his sole
the when the time to hold the ‘testatrix the settlor name, but his
, ’ if creates a partner,
following: comes for money in my female). trust for X Hannah, paid
distribution of the account at Such if he part of the
‘On trust trust property. National trusts attains 21 purchase price
for X for Westminster have no but does on the
life EXAMPLE Bank, Park effect not say understanding
remainde Street, until the what is to that she
r to Y’ if the settlor gives Chester on testator happen if would get an
property to the trust for dies. X dies interest in the
trustees ‘to hold on Robert’. Such before 21. property. In
trust for such of my a ‘declaration Sadly, X’s these
children and in of trust’ will interest circumstances,
such shares as my make the never the court is
trustees think fit’. original vests, likely to say
owner a because that Gary
he dies holds the legal
truste aged 20. title on a
e for The constructive
Rober trustees trust for
t. will hold himself and
the trust Hannah in
property equity.
on a
resulting
trust for
the
settlor.
4. The beneficial interests available
Vested OR Contingent In Possession OR In remainder
vested interest if that beneficiary exists and A beneficiary has an interest in possession if
does not have to satisfy any conditions he can enjoy that interest immediately.
imposed by the terms of the trust before
becoming entitled as of right to trust
property.
A beneficiary has an interest in remainder if
A beneficiary has a contingent interest if it he cannot enjoy it immediately but instead
is conditional upon the happening of some has to wait until some other beneficiary’s
future event that may not happen, or if the right to enjoyment expires. The interest is
beneficiary is not yet in existence (eg a trust said to be ‘postponed’.
‘for my grandchildren’ and the settlor does
not yet have any grandchildren).
, 5. Conclusion on advice
What happened when someone dies? –
Creation of a will
1. Explain the administration when someone dies + Apply to facts
- his ‘estate’ (all the property in which that person had a vested interest) is dealt with
by his personal representatives (‘PRs’)
- The PRs will first use the estate to pay any inheritance tax due and the deceased’s
debts, and then distribute what is left to the persons who are entitled to it
(‘beneficiaries’).
- To achieve this, the PRs automatically become legal and beneficial owners of the
property forming the estate of the deceased when he dies.
- Where there is no will, or a will does not name executors, or the persons named in
the will cannot act as executors (eg because they have died), there are statutory
rules that govern who will be the PR.
2. The formalities of a Will + apply to facts
- A person who makes a will is described as testator (testatrix if female
- By s 9 of the Wills Act 1837, a will must normally be made in 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.
3. Altering a will
A will may be altered by a later document called a codicil, provided that this also is signed
and witnessed in accordance with s 9 of the Wills Act 1837
4. The legal effect of a Will and Codicils
until the testator dies, a beneficiary has merely the hope of receiving his gift (sometimes
called a mere ‘expectancy’). The testator can change his will at any time until death in
accordance with the formalities under s 9 of the Wills Act 1837 (above).
5. Gifts available in a will – apply to facts where relevant
A devise A legacy or Specific gifts, Pecuniary A residuary Gifts on
bequest legacies or legacies gift (gift of trust.
devises residue)
is a gift of gift of gifts of an gifts of is a gift of A will need
freehold personal asset or money. what not make a
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