Creation of a Trust: Essential Elements and Requirements

Question 1

Which method is NOT recognized for creating a trust?

Accepted Answer

Oral agreement

Answer

Declaration of trust

Answer

Transfer of property into a trust

Answer

Inclusion in a will

Question 2

What is the legal significance of the settlor's intention in creating a trust?

Accepted Answer

It determines the validity of the trust.

Answer

It outlines the extent of the trustee's authority.

Answer

It identifies the beneficiaries of the trust.

Answer

It specifies the duration of the trust.

Question 3

Identify the defining characteristic of a fixed trust:

Accepted Answer

The beneficiaries are predetermined and have fixed entitlements.

Answer

The trustee has broad discretionary powers.

Answer

The income distribution is flexible and subject to the trustee's discretion.

Answer

The trust has an indefinite duration.

Question 4

What is the primary objective of the "Rule in Saunders v Vautier"?

Accepted Answer

To prevent the failure of a trust due to uncertainties regarding beneficiaries.

Answer

To establish the settlor's original intent in creating a trust.

Answer

To restrict the powers that can be exercised by the trustee.

Answer

To provide clear guidelines for the distribution of trust assets.

Question 5

Which of the following is a direct consequence of a successfully established trust?

Accepted Answer

The legal and equitable ownership of the trust assets are separated.

Answer

The beneficiaries immediately assume full ownership of the trust assets.

Answer

The trust becomes irrevocable and cannot be terminated.

Answer

The trustee incurs unlimited personal liability for the trust's obligations.

Question 6

Describe the primary responsibility of a trustee in a trust arrangement.

Accepted Answer

Managing and administering the trust assets according to the trust's terms.

Answer

Determining the beneficiaries who will receive the trust's assets.

Answer

Establishing the terms and conditions of the trust.

Answer

Investing the trust's funds to generate income.

Question 7

Which of the following is not a valid inter vivos trust in UK law?

Accepted Answer

A trust for a pet dog

Answer

A trust for the settlor's unborn grandchild

Answer

A trust for the settlor's friend

Answer

A trust for the settlor's favorite charity

Question 8

What is the primary role of a trustee in a trust?

Accepted Answer

To manage the trust property and enforce the terms of the trust

Answer

To represent the beneficiaries in court

Answer

To provide advice to the settlor on trust matters

Answer

To act as an impartial arbiter between the beneficiaries

Question 9

Which of the following is a consequence of a trust being declared void?

Accepted Answer

The trust property reverts to the settlor

Answer

The beneficiaries may enforce the trust

Answer

The trustee may retain the trust property

Answer

The trust property is forfeited to the Crown

Question 10

How does the settlor's intention play a crucial role in creating a trust?

Accepted Answer

It determines the terms of the trust and the rights of the beneficiaries

Answer

It is irrelevant to the validity of the trust

Answer

It can be overridden by the trustee

Answer

It is only relevant in public trusts

Question 11

What is the primary objective of the Trustee Act 1925?

Accepted Answer

To consolidate and amend the law relating to trusts in the UK

Answer

To abolish the doctrine of perpetuity

Answer

To create a new type of trust, the public trust

Answer

To regulate the appointment and powers of trustees

Question 12

In trust creation, why are legal formalities crucial, and what are the consequences of neglecting them?

Accepted Answer

Legal formalities provide tangible proof of the settlor's trust-creation intent.

Accepted Answer

Failure to follow legal formalities can invalidate the trust.

Answer

Legal formalities mainly protect the trust's beneficiaries.

Answer

Consequences of disregarding legal formalities are usually minor.

Question 13

Analyze the legal and practical challenges encountered by trustees when administering trusts involving complex or illiquid assets. Discuss the strategies employed by trustees to fulfill their fiduciary responsibilities in such scenarios.

Accepted Answer

Trustees should manage the assets prudently, seeking expert advice when necessary.

Answer

Trustees should prioritize maximizing returns, disregarding the challenges posed by complex assets.

Answer

Trustees should liquidate the assets immediately, irrespective of market conditions.

Answer

Trustees should distribute the assets to beneficiaries promptly to avoid liability.

Question 14

Which of the following is NOT a requirement for the valid creation of a trust in the United Kingdom?

Accepted Answer

Consideration

Answer

Settlor's intention to create a trust

Answer

Certainty of subject matter

Answer

Ascertainment of beneficiaries

Question 15

Which of the following is NOT a characteristic of a valid subject matter of a trust in the United Kingdom?

Accepted Answer

Must be tangible

Answer

Must be capable of being owned

Answer

Must be clearly defined

Answer

Must be legal

Question 16

The rule that prevents a trust from being created for an uncertain class of beneficiaries is known as:

Accepted Answer

Rule of certainty of beneficiaries

Answer

Rule against perpetuities

Answer

Rule against remoteness

Answer

Rule of complete disposition

Question 17

Which of the following is NOT a duty of a trustee in the United Kingdom?

Accepted Answer

Duty to make a profit for the beneficiaries

Answer

Duty to act in the best interests of the beneficiaries

Answer

Duty to preserve the trust property

Answer

Duty to distribute the trust property according to the terms of the trust