R01 Trusts and trustees: free practice questions

1. Question 1 of 5

   Who has the legal ownership of trust property?

   Option A: The settlorOption B: The trusteesOption C: The beneficiariesOption D: HMRC

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   The answer is B: The trustees

   Trustees hold the legal interest and must use the property for the beneficiaries, who hold the beneficial (equitable) interest.

   Why the other options are wrong

   A

   The settlor gives the property away when creating the trust.

   C

   Beneficiaries hold the beneficial or equitable interest, not the legal title.

   D

   HMRC has no ownership of trust property.

2. Question 2 of 5

   Which are the 'three certainties' needed for a valid trust?

   Option A: Certainty of value, date of creation and witnessOption B: Certainty of settlor, trustees and their solicitorOption C: Certainty of tax treatment, income and capitalOption D: Certainty of words, subject matter and objects

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   The answer is D: Certainty of words, subject matter and objects

   Following Knight v Knight, the words must show a trust is intended, the property must be specified and the beneficiaries must be ascertainable.

   Why the other options are wrong

   A

   Value, date and witnesses aren't the three certainties.

   B

   The certainties concern the trust's words, property and beneficiaries, not the people setting it up.

   C

   Tax, income and capital aren't the three certainties.

3. Question 3 of 5

   A man takes out a policy on his life in trust for his wife, but she murders him. Following Cleaver v Mutual Reserve Fund Life Association, what happens to the policy money?

   Option A: It's paid to the Crown as ownerless (bona vacantia) propertyOption B: It goes to the wife, as the named beneficiary of the trustOption C: It's held on a resulting trust for the husband's estateOption D: It's kept by the life office, as the trust has failed

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   The answer is C: It's held on a resulting trust for the husband's estate

   No one may benefit from their own crime, so the trust failed and the money was held on a resulting trust for the husband's estate.

   Why the other options are wrong

   A

   The Crown takes only where there are no heirs.

   B

   The wife couldn't benefit from her own criminal act.

   D

   The policy money was payable, but to the estate.

4. Question 4 of 5

   Under section 31 of the Trustee Act 1925, what can trustees do?

   Option A: Use trust income for a minor beneficiary's maintenance or educationOption B: Buy trust property for themselves at less than its market valueOption C: Add new beneficiaries from outside the class named in the trustOption D: Pay trust capital back to the settlor whenever the settlor asks

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   The answer is A: Use trust income for a minor beneficiary's maintenance or education

   Section 31 lets trustees use income for an infant beneficiary's maintenance or education. Section 32 allows advancement of capital.

   Why the other options are wrong

   B

   Buying trust property cheaply would be a breach of trust.

   C

   Trustees can only act within the class of beneficiaries set out.

   D

   Trust property is for the beneficiaries, not the settlor.

5. Question 5 of 5

   Under the rule in Saunders v Vautier, when can beneficiaries end a trust and take the property?

   Option A: Only once the trust has been running for at least 21 yearsOption B: When all are known adults, together entitled to everything, with no others possibleOption C: Whenever a majority of the beneficiaries agree that the trust should endOption D: Only with the settlor's written consent, even if the settlor has since died

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   The answer is B: When all are known adults, together entitled to everything, with no others possible

   If all beneficiaries are known, have reached majority, are together entitled to the whole beneficial interest and no others can be added, they can direct the trustees to hand over the property.

   Why the other options are wrong

   A

   There's no 21-year wait.

   C

   All, not a majority, must agree and meet the conditions.

   D

   The settlor's consent isn't required under the rule.

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