Classification of Trusts: Master the Types of Trusts in Trusts Law

Question 1

What type of trust arises when a person acquires property that, in equity, belongs to another person?

Accepted Answer

Resulting trust

Answer

Express trust

Answer

Implied trust

Answer

Charitable trust

Question 2

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

Accepted Answer

The trustee holds the property solely for the benefit of the beneficiary

Answer

The trustee has absolute discretion over the property

Answer

The trustee has a personal interest in the property

Answer

The beneficiary has no enforceable rights against the trustee

Question 3

Who is the person who creates and establishes a trust?

Accepted Answer

The settlor

Answer

The beneficiary

Answer

The trustee

Answer

The enforcer

Question 4

Which of the following best exemplifies a constructive trust?

Accepted Answer

A trust created to prevent a person from profiting from their wrongdoing.

Answer

A trust created by a will or other written document.

Answer

A trust created to hold property for a charitable purpose.

Answer

A trust created to manage the affairs of a minor child.

Question 5

What is the primary role of the settlor in the creation of a trust?

Accepted Answer

To clearly define the terms and conditions of the trust.

Answer

To transfer the trust property to the trustee.

Answer

To appoint the trustee who will manage the trust.

Answer

To provide ongoing supervision and guidance to the trustee.

Question 6

What is the defining characteristic of a bare trust?

Accepted Answer

The trustee has limited or no powers to manage the trust property.

Answer

The trustee has broad powers and discretion over the trust property.

Answer

The beneficiary has a guaranteed right to receive the trust property.

Answer

The trust is created for a specific charitable or non-profit purpose.

Question 7

Which of the following accurately describes the creation of an express trust?

Accepted Answer

Established through explicit words or actions indicating an intention to create a trust.

Answer

Automatically arises by law without an express declaration.

Answer

Gives the settlor complete authority over the trust's assets.

Answer

Grants the trustee absolute discretion in distributing the trust's assets.

Question 8

Which type of trust provides the trustee with the greatest latitude in managing its assets?

Accepted Answer

Discretionary trust

Answer

Fixed trust

Answer

Protective trust

Answer

Bare trust

Question 9

What is the primary objective of a protective trust?

Accepted Answer

Shielding beneficiaries from mismanagement of their funds.

Answer

Providing tax benefits for intergenerational wealth transfer.

Answer

Ensuring assets are utilized for specific purposes.

Answer

Granting the trustee unrestricted authority over the trust's assets.

Question 10

Implied trusts:

Accepted Answer

Automatically arise by operation of law.

Answer

Require an explicit declaration of intent to create a trust.

Question 11

What is the primary role of the settlor in the creation of a trust?

Accepted Answer

Establishing and funding the trust.

Answer

Managing and distributing the trust's assets.

Answer

Monitoring compliance with the trust's governing documents.

Answer

Receiving the benefits from the trust's assets.

Question 12

Which fundamental principle of equity underpins the law of trusts?

Accepted Answer

Fiduciary duty.

Answer

Equity follows the law.

Answer

Unconscionability.

Answer

Rule against perpetuities.

Question 13

What happens if the required formalities for creating an express trust are not met?

Accepted Answer

The trust is invalid.

Answer

The trust is valid but cannot be enforced.

Answer

The settlor becomes responsible for the trust's debts.

Answer

The beneficiaries can sue the trustee for a breach of trust.

Question 14

Which characteristic is NOT applicable to express trusts?

Accepted Answer

Created by operation of law

Answer

Involves three parties: settlor, trustee, and beneficiary

Answer

Can be written or oral

Answer

Created by the settlor's intentional act

Question 15

Which type of trust arises when a property transfer fails, resulting in the transferee holding the property for the benefit of the transferor?

Accepted Answer

Resulting trust

Answer

Implied trust

Answer

Express trust

Answer

Constructive trust

Question 16

A private trust is characterized by:

Accepted Answer

Specifically named or identifiable beneficiaries

Answer

Public purpose

Answer

Charitable purposes

Question 17

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

Accepted Answer

Trust for educational purposes

Answer

Discretionary trust

Answer

Protective trust

Answer

Commercial trust

Question 18

A trust that grants the trustee flexibility in distributing trust assets is known as:

Accepted Answer

Discretionary trust

Answer

Protective trust

Answer

Fixed trust

Question 19

Which legal requirement is essential for a trust's validity?

Accepted Answer

Certainty of intention

Answer

Trustee's legal capacity

Answer

Consideration between parties

Answer

Absence of undue influence

Question 20

The rule against perpetuities primarily addresses:

Accepted Answer

The maximum duration for which a trust can exist

Answer

Trustees' duties and responsibilities

Answer

Beneficiaries' powers

Answer

Tax implications of trusts

Question 21

The variation of trusts legislation enables:

Accepted Answer

Modifying or terminating a trust under specified circumstances

Answer

Creating trusts without a settlor

Answer

Imposing trusts on fraudulently acquired property

Question 22

A trust established through a clear and explicit statement of the settlor's intentions is known as:

Accepted Answer

Express Trust

Answer

Resulting Trust

Answer

Constructive Trust

Answer

Implied Trust

Question 23

Which characteristic is NOT essential for a charitable trust?

Accepted Answer

Identifiable individual beneficiaries

Answer

Charitable purpose

Answer

Public benefit

Answer

Legal recognition

Question 24

When a person contributes more to the purchase of property than their legal interest allows, a trust that arises automatically is called a:

Accepted Answer

Resulting Trust

Answer

Express Trust

Answer

Constructive Trust

Answer

Implied Trust

Question 25

A trust imposed by the court to prevent unjust enrichment, typically in situations involving fraud or wrongdoing, is termed a:

Accepted Answer

Constructive Trust

Answer

Express Trust

Answer

Implied Trust

Answer

Resulting Trust

Question 26

Which of the following is NOT considered a type of implied trust?

Accepted Answer

Trusts for charitable purposes

Answer

Trusts arising from proprietary estoppel

Answer

Trusts based on presumed settlor intention

Answer

Common intention constructive trusts

Question 27

The 'three certainties' doctrine is crucial for creating a valid trust. Which of the following is NOT one of the three certainties?

Accepted Answer

Certainty of the trustee

Answer

Certainty of intention

Answer

Certainty of subject matter

Answer

Certainty of objects

Question 28

A settlor establishes a trust with a clause stating that the trustee 'shall distribute the income to my children in such proportions as the trustee sees fit'. This is an example of a:

Accepted Answer

Discretionary Trust

Answer

Fixed Trust

Answer

Resulting Trust

Answer

Bare Trust

Question 29

Which type of trust is most commonly used for estate planning, allowing the settlor to maintain control over their assets even after death?

Accepted Answer

Testamentary Trust

Answer

Constructive Trust

Answer

Bare Trust

Answer

Inter vivos Trust

Question 30

A settlor creates a trust for the benefit of 'my deserving friends'. This trust is likely to fail due to lack of:

Accepted Answer

Certainty of objects

Answer

Certainty of subject matter

Answer

Certainty of trustee

Answer

Certainty of intention