Question 1

Which one or more of the following statements is true?&#10;A) A deficiency with trusts is that the interests of the beneficiaries have to be defined in advance, so there is no flexibility.&#10;B) A trust can allow the trustees to choose who should benefit.&#10;C) A trust can only be created if the beneficiaries can all be named at the time the trust is set up.&#10;D) The rights of a beneficiary under a trust may be capable of being withdrawn in some circumstances.

Accepted Answer

A) This statement is false. Trusts can be set up with different levels of flexibility, depending on the needs of the beneficiaries and the intentions of the settlor.
B) This statement is true. Trustees can have the power to decide how the trust assets should be distributed among the beneficiaries, as long as this power is clearly specified in the trust deed.
C) This statement is false. While it is preferable to name the beneficiaries at the time the trust is created, it is possible to set up a trust with a more general class of beneficiaries (e.g. "my grandchildren"), as long as this class is clearly defined and sufficiently certain.
D) This statement is true. The rights of a beneficiary under a trust can be restricted or withdrawn if certain conditions are met, such as a breach of trust or changes in circumstances that make it impractical to continue with the trust as originally planned. However, these restrictions or withdrawals must be clearly specified in the trust deed and satisfy the legal requirements for the modification or termination of trusts.

Question 2

Which one or more of the following statements about the beneficiary principle is true?&#10;A) Every trust, without exception, must have immediately identifiable beneficiaries who can enforce the trust .&#10;B) A trust to look after a named pet is valid because it is well known that people who care for animals are also caring in relation to other human beings, so there is a public benefit.&#10;C) Trusts for purposes will be valid, even if there are no human beneficiaries, provided that the purpose is defined with sufficient clarity to enable the court to compel its performance.&#10;D) Even if a trust has human beneficiaries, the trust may fail for other reasons.

Accepted Answer

The beneficiary principle requires that a trust must have identifiable beneficiaries, but it is not an absolute rule. Trusts for purposes can also be valid if the purpose is defined with sufficient clarity. However, even if a trust has identifiable beneficiaries, it may still fail for other reasons, such as uncertainty of terms or illegality. Option A is incorrect because there are some exceptions to the beneficiary requirement. Option B is incorrect because the public benefit must be a charitable purpose, which does not include caring for pets. Option C is partially correct, but it is important to note that the purpose must be for a recognized charitable purpose and not just any purpose.

Question 3

Which of the following statements is true?&#10;A) A trustee is under a duty to act even-handedly between the beneficiaries of a discretionary trust when exercising a discretion.&#10;B) A trustee can act capriciously when exercising a discretion, provided that the trustee does not select a beneficiary outside the class.

Accepted Answer

A trustee is under a duty to act even-handedly between the beneficiaries of a discretionary trust when exercising a discretion. This means that the trustee must make decisions in a fair and impartial manner, taking into account the interests of all the beneficiaries and not favoring any one beneficiary over another. Acting capriciously or arbitrarily is not consistent with this duty. Choosing a beneficiary outside the class could also be a breach of trust, as it goes beyond the trustee's powers and could be considered a misuse of the trust assets.

Question 4

Which of the following statements about Re Denley's Trust Deed (1969) is true?&#10;A) The trust was upheld because the provision of the playing field was a charitable public purpose.&#10;B) Goff J held that if the playing field was sold, the proceeds would be shared equally between the employees of the company.&#10;C) Trusts to provide rugby and association football pitches are always upheld because they were games invented in Britain.&#10;D) Because of the equitable maxim 'equity looks to the intent rather than to the form', a trust expressed as for purposes might be interpreted as being for an ascertainable class.

Accepted Answer

In Re Denley's Trust Deed (1969), the court recognized that a trust could be valid if it had a direct and indirect benefit to an ascertainable group of individuals, even if it was expressed in the form of a purpose trust. This was a deviation from the traditional view that purpose trusts (those set up for a purpose rather than to benefit specific individuals) were generally invalid unless they were charitable. The decision was based on the principle that equity looks to the intent rather than the form, allowing for a more flexible interpretation of trusts.

Question 5

Which of the following statements about Re Endacott (1960) are true?&#10;A) The judge referred to Homer nodding because he was a fan of The Simpsons.&#10;B) The case involved a gift for the purposes of providing a useful memorial which failed because it was not charitable.&#10;C) A good draftsman could have drawn up a gift with similar effect which would have been valid.&#10;D) . The case holds that a trust can fail for administrative unworkability.

Accepted Answer

The case involved a gift for a non-charitable purpose, which failed because it did not meet the legal requirements for a charitable trust. A skilled draftsman could have structured the gift in a way that would have been legally valid.

Deck 15: Choosing Who Benefits