Deck 2: Equity and the Management of Property; and Equitable Obligations

Question 1

Which of the following best describes the purpose of a trust?

A) A trust is a device which compels one set of persons to act for another.
B) A trust is a device that separates the management and enjoyment of property.
C) A trust is a device that permits the legitimate minimization of taxation.
D) A trust is a device that replicates the historical use in modern days.

Answer 1

B

Question 2

Which of the following statements is incorrect in relation to the trustee of a trust?

A) A trustee has powers control or management of the property under the trust.
B) A trustee is entitled to the benefit of the property under the trust.
C) Has legal title to the property.
D) May not treat the trust property as his own and do with it as he pleases.

Answer 2

B

Question 3

Which of the following statements is incorrect in relation to the beneficiary of a trust?

A) If trust property is sold on wrongfully, the beneficiary may have remedies against the trust property and the persons who hold it.
B) A beneficiary may direct the trustees to carry out management for his or her benefit.
C) A beneficiary enjoys beneficial ownership in the trust property.
D) A beneficiary has rights in equity against the trustee if the trustee fails to act for the benefit of the trust.

Answer 3

B

Question 4

Which of the following situations does not describe the situation where a trust will be used in relation to ownership of land?

A) Where beneficial ownership is held by persons as joint tenants.
B) Where beneficial ownership is held by persons as tenants in common.
C) Where one person is entitled to the land as a single owner.
D) Where legal title is held by persons as joint tenants.

Question 5

Which of the following is not a recognized use of the trust in managing property?

A) Secretly providing for the children of an illegitimate relationship.
B) Allowing multiple persons to be entitled to property.
C) Sale of property from one to another.
D) Providing a mechanism for the collective investment of funds.

Question 6

Which of the following is not a situation where a trust may arise?

A) To give effect to a legitimate expectation to property.
B) To provide a creditor with a secured debt.
C) To secure the return of misappropriated property.
D) To help recover damages on breach of contract.

Question 7

Which of the following statements best describes the rules on purpose trusts?

A) Equity will allow the enforcement of a trust for a purpose, just at it allows a trust to exist for named individuals.
B) Equity will normally only allow the enforcement of purpose a trust where that trust is recognized as a charitable trust under the legal definition of 'charity'.
C) Settlors may create trusts for a purpose, but equity will not enforce them.
D) Equity will recognise a purpose trust, as long as at least one named beneficiary also benefits under the trust.

Question 8

Which of the following collective investment vehicles requires a trust to operate effectively?

A) Occupational pension schemes.
B) A unit trust.
C) An investment trust.
D) A credit union, which makes short-term loans to subscribing members at a low rate of interest.

Question 9

Which of the following statements exemplifies the ability of a settlor to use a trust to in relation to levels of taxation?

A) A trust can be used to avoid any tax payments whatsoever.
B) A trust can be used to help reduce any tax payments, but it is increasingly difficult to do so
C) A trust can only be used to avoid or minimise payments of inheritance tax.
D) A trust can be used to minimise liability to all taxes, except capital gains tax.

Question 10

Which of the following is true in relation to the interplay of agency and equity?

A) Agency, like a trust, allows management and ownership of property to be separated from the rights to enjoy the benefits of the property.
B) Equity treats agents as fiduciaries, so that they may be held liable for account any abuse of their position as agents.
C) Agency is a common law concept, and, as such, equity has not role to play in the enforcement of agency relationships.
D) Agency is a common law concept and is protected by common law damages, Equity has nothing to add to the concept of agency,

Question 11

Which of the following is not a characteristic of a trust?

A) A trust can only exist in relation to specific property (real or personal).
B) A trustee cannot also be a beneficiary under a trust.
C) A trust can only exist for legal persons who must be able to enforce the duties under a trust.
D) Legal title must be vested in trustees.

Question 12

Connie and Prunella are the adult beneficiaries under a trust. Basil is the trustee. Connie and Prunella do not agree with the way in which Basil has been administering the trust for them, although they concede he has not acted in breach of trust. Connie and Prunella can:

A) Give Basil binding direction as to how best to manage the trust for their benefit.
B) Do nothing, except to try and persuade Basil to do what they would like.
C) Bring the trust to an end, and take control of the property themselves
D) Fire Basil, and take over as trustees, acting for themselves as beneficiaries.

Question 13

Which of the following statements is true in relation to the nature of a beneficial interest under a trust?

A) Beneficial interests are not proprietary rights, as they are rights in personam.
B) Beneficial interests may be proprietary rights, if the trust property is a right in rem.
C) Beneficial interests are proprietary rights, as they are capable of enduring a change of ownership.
D) Beneficial interests are neither proprietary rights or personal rights, but a new classification of right.

Question 14

Which of the following statements is true?

A) A trust and a power are identical methods for distributing property.
B) A trust and a power are both methods for distributing property, and differ only in the legal tests applicable to establish them.
C) A trust and a power are similar methods of distributing property, but differ in the enforceability of the obligation by the potential objects.
D) A trust and a power differ in that a trust provides a fixed method for distributing property to named persons whereas a power allows flexibility in deciding who should benefit under a distribution of property.

Question 15

Which of the following statements is false?

A) Where the donee is granted a mere power, and makes a distribution outside the objects of the power, the potential objects have no right of redress.
B) Where a mere power is given, the donee is under no obligation to carry out the terms of the power, but may instead choose to make no appointment.
C) Where a fiduciary power is granted to the donee, the donee need not make a distribution, but must consider whether or not to do so.
D) The objects of a power have no rights in relation to the property contained in the power unless and until a distribution is made by the donee of the power.