Chapter 3 Multiple choice questions

. Which of the following trusts do not have to satisfy all of the three certainties?

Fixed trusts

Secret trusts

Charitable trusts

Discretionary trusts

. What are precatory words?

Words used to denote the intention to create a trust.

Words that transfer property, but do not declare a trust.

Words which impose a moral obligation rather than an equitable one.

Informal words capable of establishing an intention to create a trust rather than a gift.

. Which of the following gifts do not demonstrate an intention to create a trust?

1 Christopher wins £250,000 with his premium bonds numbers. He meets his best friend, Jason, to celebrate his winnings. At the end of the evening he presents Jason with a cheque for £10,000 saying, 'I know how hard you work for your loved ones, so I want you to have this for your family.'
2 Jennifer's will states: 'I leave £50,000 to Francois, which I would like him to divide between himself and his brothers as he sees fit.'
3 Brenda and Brandon are in love. They decide to move in together and Brandon agrees to pay £350 rent/month. When Brandon moves into Brenda's house, Brenda hands him a set of keys and says: 'This is our home now'.
4 Joseph's will contains the following provision: 'I leave £100,000 to Thomas, to apply the net income at his discretion amongst my relatives for a period of ten years, after which time the capital shall be divided equally amongst my surviving children.'

1, 2, 3, and 4

1, 2, and 3

2, 3, and 4

4

. Link the following options with the correct description:

1 £100,000 to my trustees Beverley and Simon, the net income of which is to be applied at their absolute discretion in making grants to members of my family.
2 £150,000 to my trustees, Sasha and Gary, the net income of which shall be applied to those members of my family they believe to be most deserving in whatever proportions they decide most appropriate. If after ten years, no such appointments have been made, the entire trust fund shall be donated to the Penarth Sanctuary for Abandoned Puppies.
3 £200,000 to Dominic to hold on trust for my wife, Elaine, for life, with the remainder to my two children, Samuel and Tabitha.
4 £150,000 to my trustees Rupert and Margaret, the net income of which shall be applied at their absolute discretion amongst soldiers from Colchester injured in the course of their duties. Any surplus shall be added to the capital of the trust and invested.

I Fiduciary power
Ii Non-exhaustive discretionary trust
Iii Discretionary trust
Iv Fixed trust

1 = iii; 2 = ii; 3 = iv; 4 = i

1 = i; 2 = iii; 3 = ii; 4 = iv

1 = iii; 2 = i; 3 = iv; 4 = ii

1 = ii; 2 = iv; 3 = i; 4 = iii

. Which of the following items of property do not satisfy the test for certainty of subject matter?

£20,000

One of my yachts

40% of my shares in the Royal Bank of Scotland

All the Bordeaux wine in my cellar

. Which of the following statements best expresses the ratio of Re London Wine Co [1986]?

Unsegregated goods will not satisfy the test for certainty of subject matter.

Intangible goods cannot be held on trust.

A trust of part of a bulk of tangible property can only satisfy the test for certainty of subject matter if all the property that makes up the bulk is identical.

A trust of part of a bulk of tangible property will satisfy the test for certainty of subject matter if that part is separated from the rest.

. Identify which of the discretionary trusts set up for the following groups would be valid (assuming that they satisfy both the certainties of intention and subject matter):

1 The residents of Manchester
2 Present and retired employees of Bannerman Recycling Ltd
3 Good-looking footballers
4 Gay men and women living in Worcester

1, 2, and 4

2, 3, and 4

1 and 2

2 and 4

. Which of the following statements about McPhail v Doulton [1971] are true?

1 McPhail v Doulton establishes the same test for certainty of objects for discretionary trusts as for fixed trusts.
2 McPhail v Doulton establishes the same test for certainty of objects for discretionary trusts as for fiduciary powers.
3 Re Baden's Trust [No2] [1973] overruled McPhail v Doulton in respect of discretionary trusts.
4 McPhail v Doulton considered whether 'relatives' and 'dependents' were conceptually certain.
5 McPhail v Doulton states that a discretionary trust will not fail because of evidential uncertainty.

2 and 5

1 and 5

2 and 4

3 and 5

. Which of the following characteristics does a fiduciary power possess?

1 In order to be valid, it must be possible to draw up a full list of the members of the class.
2 A fiduciary power will be invalid if it is administratively unworkable.
3 The class of objects who may benefit under a fiduciary power must be conceptually certain.
4 The holder of a fiduciary power is under a duty to distribute amongst the class.
5 A fiduciary power will be valid if it can be said with certainty who is not a member of the class.

1 and 2

2 and 3

3 and 4

4 and 5

. Which of the following authorities would be most appropriate to cite in support of the principle that the test for certainty of objects for fiduciary powers is one of individual ascertainability, i.e. whether it can be said with certainty that any given person is or is not a member of the class?

McPhail v Doulton [1971]

Re Gulbenkian's Settlement [1970]

Re Barlow's WT [1979]

IRC v Broadway Cottages Trust [1955]

. Which of the following statements about conceptual certainty are correct?

1 If a class to benefit under a discretionary trust lacks conceptual certainty, the trustee will take the property as a gift.
2 Megaw LJ stated that a class of a discretionary trust would be conceptually certain if it could be said with certainty that a substantial number of people fall within the class.
3 Conceptual uncertainty will not defeat a fixed trust.
4 Stamp LJ stated in Re Baden's Trusts [No2] that in order for a discretionary trust to be conceptually certain, it must be possible to say of any individual who is or is not a member of the class.
5 The level of conceptual certainty required varies for different types of trusts and powers.

1, 2, and 3

2, 3, and 4

1, 3 and 5

2, 4, and 5

. Which of the following statements best defines administrative unworkability?

It is not possible to prove who the beneficiaries are.

The trust is too complex for trustees to administer.

The definition of beneficiary is hopelessly wide.

It is not possible to find the beneficiaries.

. Which of the following statements best describes a non-exhaustive discretionary trust?

Trustees have the power to accumulate the income of the trust.

The trust property can be held in perpetuity.

The duty of care required from trustees is less than an exhaustive discretionary trust.

Trustees have the power to accumulate the capital of the trust.

. Which of the following options are gifts subject to a condition precedent?

1 Sandra may remain at Beechcroft Manor as long as she does not remarry.
2 £100,000 to my trustees, Angela and Clive, who shall apply the net income of the fund in making at their absolute discretion grants to any of my old friends in such amounts at such times and on such conditions as they think fit.
3 £50,000 to each of my children who follow in my footsteps and start their own business before the age of 25.
4 £100,000 to the first member of my family who finds where I have hidden the key to my study.
5 £75,000 to be held on trust for Daniel, Samantha, and Tracy for a period of 10 years, in the hope that it helps them achieve their ambition of completing a medical degree. After this period, the remainder will pass to my son, Adam.

1 and 2

2 and 3

3 and 4

4 and 5

. Which of the following groups would not be conceptually certain in respect of a discretionary trust?

1 Neighbours
2 Homeless people in Stoke
3 Fans of my music
4 Adopted children in Carlisle

1 and 3

2 and 4

1 and 2

3 and 4

. The final provision of Jess's will states:

"I leave the rest of my immense fortune to Zainab and Ibb on the understanding that they appoint, at their absolute discretion, the whole or any part of the property or its income to any UK born circus performers, their relatives and dependants.

Which statement best describes the following disposition?

This discretionary trust satisfies the tests for certainty of intention and subject matter, but not objects.

This discretionary trust satisfies the tests for certainty of subject matter and objects, but fails for administrative unworkability.

This discretionary trust satisfies the tests for certainty of intention and objects, but not subject matter.

This discretionary trust satisfies all three certainties of trust.

. Certainty of objects relates to the identification of what?

The type of trust that the settlor wishes to create.

The property to be held on trust.

Whether a disposition contains a mandatory power or a discretionary power to appoint property to members of a class.

The beneficiaries.

. Which of the following statements best completes the sentence, 'In a discretionary trust …'?

The class must be evidentially certain.

All members of the class are entitled to a share of the trust property.

The trustees must select someone from the class to benefit.

All members of the class chosen by the trustees must benefit equally.

. Which of the following statements about certainty of intention is correct?

Certainty of intention is based on a consideration of the overall context of a disposition.

Certainty of intention is based solely on the writing used in the disposition.

The use of mandatory language indicates that a trust was not intended.

The use of precatory words indicates that a trust was not intended.

Chapter 3 Multiple choice questions

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