Chapter 4 Self-Test Questions

What is the key test of intention to create a trust?

The settlor demonstrates an intention to create a trust by using the word 'trust'.

The settlor demonstrates an intention that someone would hold property for the benefit of another person.

The settlor transfers legal title to the property to someone else.

The settlor promises to one day give property to another person.

'In order to create a trust, it is essential that the settlor knows that this is the effect of their action.'

True.

False.

How is the intention to create a trust assessed?

Objectively: what the reasonable person would conclude the settlor intended.

Subjectively: what the settlor actually intended.

Hybrid: what the settlor actually intended as determined by the circumstances.

Recorded: the settlor must write down the exact intention and sign the writing to confirm the intention to create a trust.

In order for a trust which does not involve self-declaration to be a sham, which of the following is true?

It is sufficient that the settlor has an intention to mislead third parties in creating the trust.

It is sufficient that the trustee has an intention to mislead third parties in administering the trust.

Both the settlor and the trustee must intend to mislead third parties.

There is no requirement of an intention to mislead third parties.

What is the consequence of a trustee treating a valid trust as a sham?

The trust is a sham and will be void.

There is no consequence.

The trustee may be liable for breach of trust.

The trustee will have committed a criminal offence.

A declares that she holds 20 of her 100 sheep on trust for B. Will the trust fail for uncertainty?

Yes.

No.

Why do the courts treat tangible and intangible property differently?

Intangible property of the same type is identical, whereas tangible property is not.

Trusts of intangible property are less common and so the courts take a more flexible approach.

Tangible property is not generally numbered.

Trusts of tangible property have existed for longer and so have different rules.

A declares that she holds 100 of her 1,000 shares on trust for B. A sells 100 shares to C. Which of the following do we presume?

A sold the shares she owns beneficially.

A sold the shares she held on trust for B.

A did not sell any shares to C as she is unable to pass the legal title to shares held on trust for B.

A sold 50 of the shares that she owns beneficially and 50 of the shares that she held on trust for B.

A declares that she holds 100 of her 1,000 shares on trust for B. A sells 100 shares to C and uses the proceeds to buy shares in another company which quadruple in value. Which of the following do we presume?
There may be more than one correct answer.

A sold the shares she owns beneficially.

A sold the shares she held on trust for B.

C holds her 100 shares on trust for B.

A holds the more valuable shares on trust for B.

The co-ownership analysis of trusts of intangible property was used in which cases?

White v Shortall.

Hunter v Moss.

Pearson v Lehman Brothers Finance SA.

The co-ownership analysis of trusts of intangible property has not been affirmed by the courts.

Which of the following will fail for conceptual uncertainty?
There may be more than one correct answer.

A trust in favour of my favourite people.

A trust in favour of my favourite children.

A trust in favour of my children.

A trust in favour of my grandchildren.

What are the rules relating to size of class for fixed trusts?

If the size of the class if very large there will be too much uncertainty in administration and the trust will fail.

It is possible for the size of the class to be large but there are some limits; the number cannot be more than is classed as reasonable.

There are no strict rules as to the size of the class, but it is likely that the class will not be very large.

There are no strict rules as to the size of the class and so fixed trusts often have very large classes.

A condition subsequent means that a beneficiary's vested interest is defeated by a subsequent event. Which of the following would fail to meet the certainty test for a valid condition subsequent?
There may be more than one correct answer.

The property will be forfeited if the beneficiary gets a degree in Classics.

The property will be forfeited if the beneficiary marries someone who uses an incorrect method for making a cup of tea.

The property will be forfeited if the beneficiary drinks too much alcohol.

The property will be forfeited if the beneficiary owns a cat.

In Re Baden (No 2), the three judges agreed that the discretionary trust was evidentially certain but used different tests of 'evidential uncertainty'. If a settlor declares a trust in favour of people who have, at some point, talked in their sleep, which of the tests would it meet?
There may be more than one correct answer.

Stamp LJ's test.

Sachs LJ's test.

Megaw LJ's test.

It would meet none of the tests.

'The settlor may afford the trustee the discretion to resolve issues of uncertainty. The trustees may resolve both conceptual and evidential uncertainty.'

True.

False.

Charitable trusts are express trusts for purposes that are valid. Why does this not undermine the rationale of the beneficiary principle?

Society benefits from the existence of charities.

The Attorney General and the Charity Commission are charged with the duty of enforcing charitable trusts.

There are many exceptions to the beneficiary principle, charities are one of them.

The beneficiary principle is not important and so it does not really matter if its rationale is undermined.

'A declares a trust in favour of her relatives, but she has no living relatives. The trust will fail.'

True.

False.

Non-charitable purpose trusts have been recognized as effective in certain, very exceptional, cases. Which of the following fall within the exception to the beneficiary principle?
There may be more than one correct answer.

Trusts for animals.

Trusts for young children.

Trusts for memorials.

Trusts for antique furniture.

What is the purpose of the perpetuity rule?

To prevent people permanently hiding assets.

To ensure tax is properly paid.

To prevent wealth being locked away indefinitely.

To stop children being spoiled.

What happens if an equitable interest under a trust is subject to a condition precedent, and that condition is not satisfied before the end of the perpetuity period?

The trustee can seek an extension of the period from the court.

The beneficiary can seek an extension of the perpetuity period from the court.

If the condition is met prior to the court order declaring the expiration of the perpetuity period, the equitable interest will still vest in the object.

The interest will lapse.

If there is a chance that an interest will not vest within the perpetuity period, it will be assumed that it will not vest, and the interest will be void.

True.

False.

What is the perpetuity period for charitable trusts?

The perpetuity period is the same for all trusts.

The perpetuity period for charitable trusts is 100 years longer than for other trusts.

Charitable trusts have no perpetuity period.

The Attorney General determines the perpetuity period for each charitable trust.

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