Deck 17: Discretionary Trusts

Question 1

Which of the following is an example of a discretionary trust?

A) A transfer of land made in the names of Terry and June to hold the property on trust for themselves as joint tenants .
B) A transfer of land made in the names of Terry and June to hold the property on trust for themselves as tenants in common in equal shares.
C) A transfer of land made in the names of Terry and June to hold the property on trust for Mark.
D) A transfer of land made in the names of Terry and June to hold the property on trust for occupation by such one or more of Mark's children as they shall from time to time determine.

Answer 1

D

Question 2

Which of the following gifts in a will is an example of a discretionary trust?

A) "… and on my wife's death, I leave the residue of my estate upon trust to be divided between such of my grandchildren then living as my trustees shall in their absolute discretion determine".
B) "… and on my wife's death, I leave the residue of my estate upon trust to be divided between such of my grandchildren as shall be then living".
C) "… and on my wife's death, I leave the residue of my estate upon trust to be given to the charity nominated by my wife in her will, failing which to be divided between such of my grandchildren as shall then be living".

Answer 2

A

Question 3

Which of the following statements is true in relation to the potential objects of a trust or power?

A) The objects of a trust need to be specified with certainty, as a trust obligation must be carried out; the objects of a power need not as a power is discretionary.
B) The objects of both a trust and a power must be specified with sufficient certainty.
C) The donee or trustee of the power or trust can decide who should benefit, so there is no need to specify the objects.
D) The only purpose of specifying the objects of a trust or power is so that the potential objects know that they may benefit.

Answer 3

B

Question 4

Which of the following statements is most true in relation to the rights of the potential objects of a discretionary trust?

A) Each object has a discrete proprietary interest in the trust fund.
B) In the case of a non-exhaustive discretionary trust, the class as a whole has a proprietary interest in the trust fund.
C) In the case of an exhaustive discretionary trust, the class as a whole has a proprietary interest in the trust fund.
D) The objects of a discretionary trust have no rights whatsoever.

Question 5

Which, if any, of the following statements are true in relation to the protector of a discretionary trust?

A) A protector is a device worn by cricketers to prevent injury to a sensitive part of their anatomy.
B) The protector's consent may be required to the exercise of any discretion by the trustees.
C) All discretionary trusts must have a protector.
D) The protector may remove objects from the trust, or add them.

Question 6

Balmer, in his home-made will, leaves all his property to be held by Judas, his trustee, 'in the hope and expectation that he will distribute it to such of my blood relatives who survive me, as Judas in his absolute discretion shall decide, or in default of appointment, everything should be given to my nephew, George.'
Balmer has sought to create:

A) A fixed trust for named beneficiaries.
B) A mere power, under which Judas can either chose to distribute the pieces of crystal, or keep them for himself.
C) A discretionary trust.
D) A fiduciary power.

Question 7

Errol, in his home-made will, leaves 'ten of my most precious pieces of crystal' to be held by Jonathan, his trustee, 'in the expectation that he will distribute them to such of such students who graduated in 2015 from Barchester University as Jonathan in his absolute discretion shall decide.'
Errol has sought to create:

A) A fixed trust for named beneficiaries.
B) A mere power, under which Jonathan can either choose to distribute the pieces of crystal, or keep them for himself.
C) A discretionary trust.
D) A fiduciary power.

Question 8

Errol, in his home-made will, leaves £80,000 to Kevin, to be distributed under a discretionary trust to 'such of my old University friends who survive me, as Kevin in his absolute discretion shall decide.'
In relation to certainty of objects, which of the following statements is correct?

A) The trust is likely to be held certain, as there is a class of persons named, and it will be possible to show that at least one potential person will fall within the class.
B) The trust is likely to be held uncertain, as the words used to define the class are not defined with sufficient certainty.
C) The trust is likely to be held certain, as there is a clear class of potential objects from which Jonathan can select.
D) The trust is likely to be held uncertain, as it is not possible to know at the time the trust is created which friends will survive Errol.

Question 9

Errol, in his home-made will, leaves 'ten of my most precious pieces of crystal' to be held by Jonathan, his trustee, 'in the expectation that he will distribute them to such of such students who graduated in 2015 from Barchester University as Jonathan in his absolute discretion shall decide.'
Jonathan has been diagnosed as suffering from dementia and is incapable of making a decision.
Which of the following statements is correct?

A) The trust fails and the crystal forms part of Errol's residuary estate.
B) The trust fails and the crystal forms part of Jonathan's personal assets.
C) There is still a trust, but because Jonathan cannot make a decision, the crystal must be divided equally between the whole graduating class.
D) There is still a trust, but because Jonathan cannot make a decision, a new trustee can be appointed by the person authorised to make such an appointment, or by the court, and that trustee can make a decision.

Question 10

Merril, in his will, left a fund to Harriet, 'to hold it on discretionary trust, and to distribute it among my children in any share as Harriet in her absolute discretion thinks fit.' Merril has four children, all of whom are adults: Beverly, Coco, Davina, and Ethel. Merril has now died, and Merril's personal representatives have transferred the fund to Harriet, who has put the money in a separate bank account. Harriet has now indicated to the children that he finds it too difficult to make a decision.
Which, if any, of the following statements are true?

A) The four children can collectively instruct Harriet to transfer the fund to them in the shares which they have decided between themselves.
B) Beverly, as the oldest child, is entitled to instruct Harriet to transfer the fund to the four children in equal shares.
C) The children are immediately entitled to a one quarter interest in the fund each, so any of them can demand that Harriet pay them this share.
D) Any of the children can apply to the court for an order instructing Harriet to make a decision, or to replace Harriet as a trustee.