Chapter 14 Self-Test Questions

What is the main difference between trust powers and fiduciary powers?

Trust powers fall outside the scope of a trustee's fiduciary obligations.

Trustees must exercise trust powers whereas they may exercise fiduciary powers.

Trustees can hold several trust powers under the same trust but can only hold one fiduciary power.

They are different words for the same power.

What is a power to accumulate?

The consequence of a trustee choosing not to exercise fiduciary power is a power to accumulate.

The trustee has a trust power and so must distribute the property but has the power to replace the property.

The trustee can acquire as many trust assets as they wish.

The trustee has a discretion to build up the income before deciding to distribute it.

T is a trustee. The trust instrument says that T may distribute income for the maintenance of A in T's absolute discretion. Subject to that power, T holds the property on trust for B and C in equal shares absolutely. A asks T to exercise the power in A's favour. T refuses. What is the consequence?

T is in breach of trust.

The court will compel T to execute the power in favour of A.

The power will lapse and T will hold the property on trust for B and C equally.

The court may replace T.

'If there is a good reason, the court will allow both trust powers and fiduciary powers to be performed late.'

True.

False.

How do beneficiaries under a fixed trust become aware that they are beneficiaries?

It is on the beneficiaries themselves to discover that they are beneficiaries.

The trustees must take reasonable steps to inform the beneficiaries of their entitlement.

The trustees are under a duty to inform the beneficiaries of their right from the time of trust constitution.

The trustees are under a duty to inform the beneficiaries of their right once they have become entitled to it.

How do objects under a discretionary trust become aware that they are objects?

It is on the objects themselves to discover that they are beneficiaries.

The trustees must take reasonable steps to inform the objects of their entitlement.

The trustees are under a duty to inform the objects of their mere equity from the time of trust constitution.

The trustees are under a duty to inform the objects of their right only if the object is to receive an actual benefit from the fund.

What is a Benjamin order?

It is a court order authorizing the trustee to distribute all of the trust property even though the whereabouts of all of the beneficiaries is not known.

It is a court order requiring the trustee to advertise in a newspaper the intention to make a distribution, thereby giving potential beneficiaries at least two months to make their existence known to the trustees.

It is a court order requiring the trustee to distribute all of the trust property to one of the identified beneficiaries.

It is a court order enabling the trustee to keep some of the trust property for their own benefit when the beneficiaries cannot be located.

'It is possible to take out insurance in the event that a beneficiary cannot be located.'

True.

False.

How must trustees use trust property for beneficiaries who are minors?

Trustees must safeguard the property so that the beneficiaries can receive the benefit when they are old enough to receive it.

Trustees have a discretion to prioritize adult beneficiaries at the expense of minors.

Trustees have a power to apply trust income for the maintenance, education, and benefit of minors.

It is not possible for minors to be beneficiaries under trusts.

What is meant by 'trusts that carry the intermediate income'?

No one knows.

A beneficiary is entitled to a designated amount of income under the trust.

A beneficiary is entitled to the income once they reach a certain age.

A beneficiary is entitled to the income from the date of the gift.

'During the infancy of a child, surplus income must be accumulated by investing it. The accumulated income is treated as an accretion to the capital of the trust property.'

True.

False.

'The power of maintenance relates to the income of the trust, whereas the power of advancement relates to the capital of the trust.'

True.

False.

What is the power of advancement?

It enables the whole of a beneficiary's prospective share in the fund to be advanced for their benefit.

It enables the trustee to award a beneficiary a higher amount than their intended prospective share.

It is a presumption that family members will make gifts to other family members without expecting anything in return.

It is the power of appointing a beneficiary as a trustee.

How can the power of advancement be excluded?

The power of advancement cannot be excluded.

The power can be excluded by express contrary intent in the trust instrument.

The power can be excluded by implied contrary intent in the trust instrument.

The power can be excluded by the beneficiaries.

'The power of advancement can be exercised for any purpose.'

True.

False.

'The trustees may exercise the power of advancement to avoid subsequent tax liability for the beneficiaries.'

True.

False.

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