Introduction

Question 1

What are the two key components of a trust?

Answer 1

• property component
• obligation component

Question 2

What is property component?

Answer 2

There must be identifiable trust property

Question 3

What respective interests do a trustee and a beneficiary have in trust property?

Answer 3

A trustee has an the legal interest in the property - it is responsible for managing the property

A beneficiary has an equitable interest - it is it benefit from the property (beneficial interest)

Question 4

What can be held on trust?

Answer 4

There is no limit.

Can be physical property or intangible property such as debt or a company share.

Question 5

What happens if the trust property is destroyed without any fault on the part of the trustee?

Answer 5

The trust ceases to exist

Question 6

What happens if the trust property is destroyed and the trustee is at fault?

Answer 6

The trust continues to exist.

Trustee must restore the property and if not possible, personally compensate trust for loss

Question 7

What is the obligation requirement under trust?

Answer 7

A trust must have a trustee who manages the trust property for the benefit of the beneficiaries

Question 8

What is the objects requirement of the trust?

Answer 8

A trust must have a beneficiary or a permitted purpose

Question 9

Can a trustee also be a beneficiary of the trust?

Answer 9

Yes but must exercise trustee’s duties and power for all beneficiaries not just themselves

Question 10

What are the benefits of using trusts?

Answer 10

• separation of ownership and management of property
• expertise - trustee can be an expert in managing property
• protection - protects those who are incapable of managing their own property
• flexibility - can create different interests in property, share interests etc
• control - allows original owner to retain degree of control over property in way outright gift doesn’t
• ringfencing on insolvency
• tracing and proprietary claims - can recover property more easily using trusts, if trusts issuesd
• tax benefits

Question 11

What key uses are there for trusts in commercial context?

Answer 11

• share ownership arrangements
• investment funds
• pension funds
• other forms of tax-efficient
• employee remuneration
• corporate tax avoidance

Question 12

What key uses are there for trusts for individuals?

Answer 12

• testamentary planning
• land ownership
• tax planning