Equity and Trusts: Master the Fundamentals of Law and Justice

Question 1

Which of the following actions would NOT constitute a breach of trust?

Accepted Answer

Delegating trust responsibilities to another person with the beneficiary's consent

Answer

Selling trust property without proper authority

Answer

Investing trust funds in a manner inconsistent with the trust's terms

Answer

Failing to distribute trust income to beneficiaries as directed by the trust instrument

Question 2

Which of the following is NOT a type of Express Trust?

Accepted Answer

Constructive Trust

Answer

Private Express Trust

Answer

Public Express Trust

Answer

Semi-Public Express Trust

Question 3

Which element is NOT essential for the validity of a trust under English law?

Accepted Answer

Consideration

Answer

Certainty of intention

Answer

Certainty of subject matter

Answer

Capacity of the settlor

Question 4

What is the primary objective of creating a trust?

Accepted Answer

To manage assets for the benefit of specified individuals.

Answer

To reduce tax obligations.

Answer

To establish a separate legal entity.

Answer

To transfer assets without the need for probate.

Question 5

Which statement accurately describes a key characteristic of express trusts?

Accepted Answer

The settlor clearly expresses their intent to establish a trust.

Answer

The trust benefits an unspecified group of individuals.

Answer

The trust property is dedicated to a charitable cause.

Answer

The trust is formally established through a written document.

Question 6

What is the primary distinction between a fixed trust and a discretionary trust?

Accepted Answer

In a fixed trust, the trustee has no discretion in distributing the trust property, whereas in a discretionary trust, the trustee has wide discretion.

Answer

A fixed trust is established for a specific purpose, while a discretionary trust is established for a general purpose.

Answer

A fixed trust is irrevocable, while a discretionary trust is revocable.

Question 7

In the context of equity and trusts, when is a constructive trust for mistake likely to be imposed?

Accepted Answer

When an erroneous property transfer results in unjust enrichment

Answer

When a will includes ambiguous or conflicting provisions

Answer

When a trust is established under duress or undue influence

Answer

When a trustee violates their fiduciary obligations

Question 8

In determining a settlor's intent when creating a trust, which factor is disregarded?

Accepted Answer

Oral statements contradicting the written trust document

Answer

Written statements or explicit instructions

Answer

Context and circumstances surrounding the trust's creation

Answer

Settlor's subsequent actions and declarations

Question 9

Which of the following is not a recognized type of trust in the legal system?

Accepted Answer

Unconscionable trust

Answer

Express trust

Answer

Implied trust

Answer

Resulting trust

Question 10

In Equity Law, what are the three essential elements required for the creation of a valid express trust?

Accepted Answer

Certainty of intention, certainty of subject matter, and certainty of objects

Answer

Certainty of intention and certainty of subject matter

Answer

Certainty of intention and certainty of objects

Answer

Certainty of subject matter and certainty of objects

Question 11

Which of the following is a defining characteristic of a trust?

Accepted Answer

Transfer of legal title to a trustee for the benefit of another party

Answer

Beneficiaries have direct control over trust assets, while the trustee has no legal responsibilities

Answer

Settlor maintains ownership and control, with the trustee acting solely as an advisor

Answer

Trusts are solely intended for tax avoidance and asset protection

Question 12

What is the primary obligation of a trustee?

Accepted Answer

Act in the best interests of beneficiaries

Answer

Maximize financial returns for beneficiaries

Answer

Distribute trust assets upon termination

Answer

Adhere to the trust deed's provisions

Question 13

In trusts, which principle grants beneficiaries the right to reclaim trust property that has been unlawfully taken or transformed into a different asset?

Accepted Answer

Tracing

Answer

Subrogation

Answer

Equitable Conversion

Question 14

In a resulting trust, what is the legal presumption when property is transferred from one person to another?

Accepted Answer

The transferor intended to benefit the transferee as the absolute owner.

Answer

The transferor intended to create a trust.

Answer

A constructive trust is automatically created.

Question 15

In the absence of an express declaration of trust, when does the law presume a resulting trust?

Accepted Answer

When the transferor transfers property without specifying its intended use and the transferee does not declare a trust.

Answer

When the transferor explicitly intends to create a trust.

Question 16

What is a defining characteristic of a trust?

Accepted Answer

Separate legal and equitable ownership

Answer

A binding contract

Answer

Transfer of complete property rights

Answer

Requirement for a written document

Question 17

In the context of a trust, explain the role and importance of beneficiaries.

Accepted Answer

Beneficiaries are individuals or entities who possess rights and benefits arising from a trust arrangement.

Answer

Trustees are responsible for managing the trust, while beneficiaries have no such obligations.

Answer

Beneficiaries have no legal claims or interests in the trust's assets.

Answer

Beneficiaries are always entitled to the entire value of the trust's assets.

Question 18

What unique characteristic differentiates a resulting trust from other trust types?

Accepted Answer

Presumed creation by law, regardless of expressed intent

Answer

Necessitates property transfer to a trustee

Answer

Irrevocable, immune to evidence of opposing intent

Answer

Exclusively benefits the trust's creator

Question 19

In cases of breach of trust, what is the primary purpose of legal remedies?

Accepted Answer

To restore trust property and compensate beneficiaries for losses

Answer

To punish the trustee for their wrongdoing

Answer

To prevent the trustee from transferring or dissipating trust assets

Answer

To allow the trustee to continue administering the trust

Question 20

In equity law, an unconscionable bargain is one that is:

Accepted Answer

Grossly unfair to one party, and the other party was aware or should have been aware of the unfairness

Answer

Only present when fraud or misrepresentation is involved

Answer

Always void

Answer

Remedied solely through rescission

Question 21

Identify the fundamental distinction between an express trust and a resulting trust, highlighting the key difference in their creation.

Accepted Answer

Express trusts are intentionally established through the settlor's explicit declaration, while resulting trusts arise by operation of law, based on the presumed intention of the parties involved.

Answer

Express trusts require written documentation, whereas resulting trusts can be established orally or through implied conduct.

Answer

Express trusts are always active, while resulting trusts are always passive.

Answer

Express trusts are irrevocable, while resulting trusts are revocable.

Question 22

What is the primary fiduciary duty of a trustee?

Accepted Answer

To act in the best interests of the beneficiaries

Answer

To maximize financial gain for the beneficiaries

Question 23

Which of the following is NOT an essential requirement for establishing a valid trust in equity?

Accepted Answer

Consideration

Answer

Certainty of intention

Answer

Certainty of subject matter

Answer

Capacity

Question 24

In English law, what is the primary purpose of constructive trusts?

Accepted Answer

To prevent unjust enrichment

Answer

To fulfill statutory requirements

Answer

To enforce promises to hold property in trust

Answer

To distribute property in the absence of a will

Question 25

In estate planning, trusts can be employed to navigate legal and ethical complexities. Discuss the tax avoidance strategies, generation-skipping transfers, and the rule against perpetuities in the context of trusts.

Accepted Answer

Trusts can mitigate inheritance tax by transferring assets to beneficiaries outside the estate.

Accepted Answer

The rule against perpetuities limits the duration of trusts to prevent indefinite existence.

Answer

Generation-skipping transfers are permissible under English trust law.

Question 26

Which of the following is a fundamental principle of equity?

Accepted Answer

Equity supplements, but does not override the law

Answer

Equity follows the law

Answer

Equity acts in personam

Answer

Delay defeats equity

Question 27

According to the law, a trust is defined as:

Accepted Answer

An obligation imposed on a person to hold and manage property for the benefit of another person

Answer

A contract between two or more parties to exchange goods or services

Answer

A form of ownership where property is held jointly by multiple individuals

Answer

A legal entity that is separate and distinct from its owners

Question 28

What is the primary legal duty of a trustee?

Accepted Answer

Fiduciary duty

Answer

Duty of care

Answer

Duty of loyalty

Answer

Duty of utmost good faith

Question 29

Which of the following is NOT a characteristic of a charitable trust?

Accepted Answer

Private ownership

Answer

Public benefit

Answer

Perpetuity

Answer

Tax exemption

Question 30

What is the difference between a settlor and a beneficiary?

Accepted Answer

The settlor is the person who creates the trust, while the beneficiary is the person who benefits from it

Answer

The settlor has a legal interest in the trust property, while the beneficiary has an equitable interest

Question 31

What is a primary challenge that can limit the effectiveness of legal remedies in cases involving breaches of trust?

Accepted Answer

Difficulties in establishing damages

Answer

Legal remedies always effectively restore trust property and compensate beneficiaries

Answer

Equitable remedies are always more effective than legal remedies in addressing breaches of trust

Question 32

Examine the historical evolution of the law of trusts, identifying key factors that have shaped its development and its enduring relevance in contemporary society.

Accepted Answer

Historical Precedents and Societal Changes

Answer

Unaltered Principles Since Origin

Answer

Exclusive Influence of Legal Reforms

Answer

Diminished Significance in Modern Times

Question 33

Evaluate the role and effectiveness of the doctrine of unconscionable bargaining in addressing breaches of trust.

Accepted Answer

The doctrine of unconscionable bargaining can be an effective remedy for breaches of trust that result from unconscionable conduct.

Answer

The doctrine of unconscionable bargaining is ineffective in remedying breaches of trust.

Answer

The doctrine of unconscionable bargaining is the sole remedy available for breaches of trust.

Answer

The doctrine of unconscionable bargaining is applicable to all breaches of trust, regardless of the circumstances.

Question 34

What is the primary equitable remedy for breach of trust?

Accepted Answer

Constructive trust.

Answer

Damages.

Answer

Injunction.

Answer

Rescission.

Question 35

What is the key difference between a fixed trust and a unit trust?

Accepted Answer

A fixed trust has a specific distribution of income and capital, while a unit trust does not.

Answer

A unit trust has a specific distribution of income and capital, while a fixed trust does not.

Answer

Both statements are true.

Answer

Neither statement is true.

Question 36

Which of the following is NOT a ground for removing a trustee?

Accepted Answer

Consent of all beneficiaries.

Answer

Breach of trust.

Answer

Unsuitability.

Answer

Permanent incapacity.

Question 37

Which foundational principle of equity prioritizes fairness and justice?

Accepted Answer

Equity

Answer

Primacy of law

Answer

Strict adherence to precedent

Answer

Predictability

Question 38

What is the essential purpose of a trust?

Accepted Answer

Administering and safeguarding property for another party's benefit

Answer

Transferring property ownership without a will

Answer

Minimizing inheritance taxes

Answer

Enforcing specific actions through legal obligations

Question 39

Differentiate between legal and equitable estates.

Accepted Answer

Legal estate confers full property rights, while equitable estate has limited rights

Answer

Equitable estate confers full property rights, while legal estate has limited rights

Answer

Legal estates are established by statute, while equitable estates are created by courts

Answer

Equitable estates are established by statute, while legal estates are created by courts

Question 40

Define precatory words in a will.

Accepted Answer

Non-binding expressions of hope or wishes that do not create legal obligations

Answer

Phrases in a will that establish legally enforceable obligations

Answer

Terms used to exclude beneficiaries from inheritance

Answer

Language in a will used to create trusts

Question 41

In cases of unjust enrichment, what is equity's primary objective?

Accepted Answer

Preventing unjust enrichment at the expense of others

Answer

Punishing wrongdoers

Answer

Returning property to its rightful owner

Answer

Establishing new legal rights

Question 42

When appointing a trustee or settlor for a trust, what are the legal implications if the appointed individual lacks the mental capacity to effectively manage and administer the trust?

Accepted Answer

The appointment is void, and the court may appoint a suitable replacement to ensure the proper administration of the trust.

Answer

The appointment is generally upheld, and the incapacitated individual retains their role until their capacity is restored.

Answer

The beneficiaries of the trust have no legal recourse if the trustee or settlor lacks capacity.

Answer

The trust is automatically terminated, and the assets are distributed according to the settlor's will or the laws of intestacy.

Question 43

In which scenario would a court likely impose a constructive trust as a remedy for breach of trust?

Accepted Answer

The trustee personally benefited from the breach of trust

Answer

The trust property was transferred to a buyer who acted in good faith and without knowledge of the breach

Answer

The trustee acted in good faith and without intent to breach the trust

Question 44

What is the defining characteristic that distinguishes a trust from other legal arrangements?

Accepted Answer

The separation of legal and beneficial ownership of property.

Answer

The transfer of property to a third party for safekeeping.

Answer

The intention to create a legal obligation.

Answer

The existence of a fiduciary duty.

Question 45

Which of the following is NOT a core duty of a trustee?

Accepted Answer

To profit personally from the trust assets.

Answer

To act in the best interests of the beneficiaries.

Answer

To preserve and protect the trust property.

Answer

To provide regular accounting to the beneficiaries.

Question 46

Which of the following is a type of trust that is created through an explicit declaration by the settlor?

Accepted Answer

Fixed trust.

Answer

Implied trust.

Answer

Resulting trust.

Answer

Constructive trust.

Question 47

What is the primary distinction between a vested interest and a contingent interest in a trust?

Accepted Answer

A vested interest is present and certain, while a contingent interest is future and uncertain.

Answer

A contingent interest is present and certain, while a vested interest is future and uncertain.

Answer

A vested interest is transferable, while a contingent interest is not.

Answer

There is no distinction between a vested interest and a contingent interest.

Question 48

What is a fundamental difference between an express trust and an implied trust?

Accepted Answer

Express trusts are created with the intention of the settlor, while implied trusts are created by operation of law.

Answer

Express trusts are created orally, while implied trusts are created in writing.

Answer

Express trusts can only be used for charitable purposes, while implied trusts can be used for any purpose.

Answer

Express trusts are always valid, while implied trusts can be void for uncertainty.

Question 49

Which of the following is NOT a fundamental principle of equity?

Accepted Answer

Equity follows the letter of the law

Answer

Equity is discretionary

Answer

Equity acts in personam

Answer

Equity looks to substance over form

Question 50

For a valid express trust to be created, what are the essential requirements?

Accepted Answer

Certainty of intention, subject matter, and beneficiaries

Answer

Registration, capacity, and writing

Answer

Capacity, consideration, and writing

Question 51

What is the primary obligation that a trustee owes to the beneficiaries of the trust?

Accepted Answer

Fiduciary duty

Answer

Statutory duty

Answer

Common law duty

Question 52

In the event of a breach of trust, which remedy is most commonly imposed?

Accepted Answer

Constructive trust

Answer

Damages

Answer

Injunction

Answer

Specific performance

Question 53

What is a resulting trust?

Accepted Answer

A trust that arises by operation of law when the settlor of an express trust fails to dispose of all the trust property

Answer

A trust that is created by statute

Question 54

What is the primary purpose of the Trustee Act 1925?

Accepted Answer

To consolidate and modernize the laws governing trustees

Answer

To create new types of trusts

Answer

To abolish the concept of trusts

Question 55

What is a charitable trust?

Accepted Answer

A trust established for the benefit of the public or a section of the public

Answer

A trust established for the benefit of a specific individual or group of individuals

Answer

A trust established for the benefit of the settlor

Question 56

What is the primary purpose of a trust?

Accepted Answer

To hold and manage assets for the benefit of others

Answer

To evade taxes

Answer

To conceal assets illegally

Question 57

Which of the following is NOT a type of express trust?

Accepted Answer

Resulting Trust

Answer

Discretionary Trust

Answer

Fixed Trust

Answer

Protective Trust

Question 58

Who is responsible for administering the trust property for the beneficiaries' benefit?

Accepted Answer

Trustee

Answer

Beneficiary

Answer

Settlor

Question 59

What is the principle that allows trust property to be traced into its various forms?

Accepted Answer

Doctrine of Tracing

Answer

Equitable Maxim

Answer

Rule against Perpetuities

Question 60

What is the main purpose of the rule against perpetuities?

Accepted Answer

To prevent the excessive tying up of property in trusts

Answer

To promote the free transfer of property

Answer

To protect creditors' rights

Question 61

What is a distinguishing feature of a charitable trust?

Accepted Answer

It must have a public benefit purpose

Answer

It must have a limited duration

Answer

It must be established by a will

Answer

It cannot be modified or terminated

Question 62

What is the significance of the equitable maxim 'Equity will not assist a volunteer'?

Accepted Answer

It prevents gratuitous promises from being enforceable in trusts

Answer

It safeguards creditors' interests

Answer

It encourages charitable donations

Question 63

What is the defining characteristic of a trust?

Accepted Answer

Separation of legal and equitable ownership.

Answer

Joint ownership by the settlor and trustee.

Answer

Unilateral control by the beneficiary.

Answer

Absolute ownership by the trustee.

Question 64

What is the most common remedy for breach of trust?

Accepted Answer

Constructive trust.

Answer

Rescission.

Answer

Injunction.

Answer

Damages.