Variation and Termination of Trusts: Master the Essentials

Question 1

Who is eligible to apply for the variation of a trust?

Accepted Answer

Settlor

Accepted Answer

Beneficiaries with a vested interest

Accepted Answer

Trustees

Answer

Third party with no interest in the trust

Question 2

On what grounds may the court terminate a trust under the doctrine of cy-près?

Accepted Answer

When the original purpose of the trust has become impracticable to fulfill

Answer

When the settlor has failed to appoint a trustee

Answer

When the trust property has been lost or destroyed

Answer

When all beneficiaries have passed away

Question 3

Which of the following is NOT a factor that a court may consider when deciding whether to vary a trust?

Accepted Answer

The cost of administering the trust

Answer

The current wishes of the beneficiaries

Answer

The original intentions of the settlor

Answer

The potential tax consequences of the variation

Question 4

To which trusts does the Variation of Trusts Act 1958 apply?

Accepted Answer

All trusts created in England and Wales

Answer

Only trusts created after 1958

Answer

Only trusts created before 1926

Answer

Only charitable trusts

Question 5

In which type of trust is the doctrine of cy-près most commonly applied?

Accepted Answer

Charitable trusts

Answer

Private trusts

Answer

Totten trusts

Answer

Resulting trusts

Question 6

What is a potential impact of trust termination on beneficiaries?

Accepted Answer

Loss of access to trust assets

Answer

Creation of a new trust

Answer

Extension of the trust's duration

Answer

Unaltered beneficiary rights

Question 7

What is the primary purpose of the doctrine of cy-près?

Accepted Answer

To uphold the settlor's original intentions when the trust's original purpose has become impossible or impracticable

Answer

To distribute the trust property to the beneficiaries equitably

Answer

To terminate the trust early if it is no longer beneficial to the beneficiaries

Answer

To vary the trust's terms in response to changing circumstances

Question 8

In what situation would the doctrine of resulting trusts be invoked?

Accepted Answer

When the settlor intended to create a trust but failed to do so effectively

Answer

When a trust fails for lack of a valid purpose

Answer

When a trust is created for an illegal purpose

Answer

When the trustee breaches their fiduciary duties

Question 9

What is the fundamental difference between a fixed trust and a discretionary trust?

Accepted Answer

Beneficiaries have a fixed and indefeasible entitlement in a fixed trust, while the trustee has discretion in distributing the trust property in a discretionary trust

Answer

Beneficiaries have a discretionary entitlement in a discretionary trust, while the trustee has a fixed entitlement in a fixed trust

Answer

The settlor retains more control over a fixed trust than a discretionary trust

Answer

There is no significant difference between a fixed trust and a discretionary trust

Question 10

Which of the following is NOT a recognized ground for applying the doctrine of cy-près?

Accepted Answer

Administrative inconvenience

Answer

Trust's objectives have become obsolete

Answer

Beneficiaries have changed significantly

Answer

Original purpose of the trust has become impractical or impossible

Question 11

What is the primary purpose of the rule against perpetuities?

Accepted Answer

To prevent the indefinite tying up of property in trusts

Answer

To ensure the efficient administration of trusts

Answer

To protect the rights of future beneficiaries

Question 12

Which of the following is NOT a consequence of a trust being declared void for perpetuity?

Accepted Answer

The trust property automatically reverts to the settlor

Answer

The trust property is distributed to the intended beneficiaries

Answer

The court may apply the doctrine of cy-près

Answer

The trust is terminated

Question 13

A trust funds a library that is later demolished. Which doctrine lets the court repurpose the funds for a similar charity?

Accepted Answer

The doctrine of cy-près

Answer

The rule against perpetuities

Answer

The principle of beneficial interest

Answer

The rule against accumulation

Question 14

If only one beneficiary remains in a trust originally for a group, what's the most likely outcome?

Accepted Answer

The trust may be terminated, with the remaining beneficiary receiving the assets.

Answer

The trust assets will automatically transfer to the Crown.

Answer

The trust will continue indefinitely.

Question 15

The rule against perpetuities prevents trusts from lasting indefinitely. Which statement about this rule is FALSE?

Accepted Answer

It applies equally to all types of trusts, including charitable trusts.

Answer

It sets a maximum duration for vesting of beneficial interests.

Answer

It aims to prevent property from being tied up for an excessively long time.

Question 16

A trust funds education for the settlor's grandchildren, who have all finished their education. What is the likely outcome?

Accepted Answer

The trust may terminate if its purpose is fulfilled and there are no future beneficiaries.

Answer

The trust will continue indefinitely for potential future generations.

Question 17

A trust benefits a specific charity that later dissolves. Which outcome is LEAST likely?

Accepted Answer

The trust continues indefinitely, even though the charity no longer exists.

Answer

The trust may be terminated, distributing assets according to the settlor's intentions.

Answer

The trust funds may be redirected to a similar charity under the doctrine of cy-près.

Question 18

When deciding whether to approve a trust variation, a court considers several factors. Which is LEAST likely to be a primary consideration?

Accepted Answer

The settlor's personal opinion on the proposed variation.

Answer

The settlor's original intentions when establishing the trust.

Answer

The overall well-being of the beneficiaries involved.

Question 19

If a beneficiary of a trust declares bankruptcy, what is the most likely consequence for the trust?

Accepted Answer

The beneficiary's interest in the trust may be vulnerable to claims from their creditors.

Answer

The trust assets are transferred to the trustee's personal account for safekeeping.

Answer

The trust automatically ends, and all assets return to the settlor.

Question 20

Which of the following is NOT a ground for variation of a trust under the Trustee Act 1925?

Accepted Answer

To preserve the trust property

Answer

To change the beneficial interests

Answer

To rectify a mistake

Answer

To modernize the trust administration

Question 21

What is the effect of a valid variation of a trust?

Accepted Answer

It binds all the beneficiaries, even if they have not consented

Answer

It only binds the beneficiaries who have consented

Answer

It requires the approval of the court

Question 22

Which of the following is a requirement for the valid exercise of a power of termination?

Accepted Answer

The consent of all the beneficiaries who are of full age and capacity

Answer

The approval of the court

Answer

The consent of the settlor

Question 23

What is the effect of a valid termination of a trust?

Accepted Answer

The trust property is distributed to the beneficiaries

Answer

The trust continues to exist, but the trustee's powers are reduced

Answer

The trust property is transferred to a new trustee

Question 24

Which of the following is NOT a ground for the court to exercise its inherent jurisdiction to vary a trust?

Accepted Answer

To correct a drafting error

Answer

To rectify a mistake

Answer

To modernize the trust administration

Answer

To change the beneficial interests

Question 25

What is the doctrine of cy-près?

Accepted Answer

The court's power to modify a trust scheme so as to give effect to the settlor's general charitable intention

Answer

The rule against perpetuities

Question 26

What is the effect of an order of the court varying a trust?

Accepted Answer

It is binding on all the beneficiaries, even if they have not consented

Answer

It only binds the beneficiaries who have consented

Answer

It requires the approval of the trustee

Question 27

Which of the following is a potential benefit of varying a trust?

Accepted Answer

To update the trust to reflect changes in the law or circumstances

Answer

To increase the tax liability of the beneficiaries

Answer

To reduce the powers of the trustee