Types of Beneficiaries in Trusts Law: A Comprehensive Guide for LLM Students

Question 1

Which of the following is a key characteristic of a vested beneficiary?

Accepted Answer

Has a present, indefeasible right to receive income or capital

Answer

Interest can only be created by express words

Answer

Can only assign or sell their interest with the trustee's consent

Answer

Receives a benefit at the trustee's discretion

Question 2

A discretionary beneficiary differs from other types of beneficiaries in that:

Accepted Answer

They receive a benefit at the sole discretion of the trustee

Answer

They have a guaranteed right to receive a share of the trust property

Answer

They have the power to compel the trustee to distribute the trust property

Answer

They cannot assign or sell their interest

Question 3

A power of advancement allows the trustee to:

Accepted Answer

Distribute trust property to a beneficiary before they reach the age of majority

Answer

Sell trust property and reinvest the proceeds without seeking consent

Answer

Appoint new trustees without consulting the beneficiaries

Answer

Vary the terms of the trust unilaterally

Question 4

The doctrine of tracing is primarily used to:

Accepted Answer

Identify trust property that has been wrongfully disposed of

Answer

Enforce a beneficiary's right to income only

Answer

Establish the validity of a trust

Answer

Vary the terms of a trust

Question 5

Which of the following is NOT a recognized type of constructive trust?

Accepted Answer

Express trust

Answer

Resulting trust

Answer

Implied trust

Answer

Quistclose trust

Question 6

Which type of beneficiary has an immediate and fixed interest in the trust property?

Accepted Answer

Vested beneficiary

Answer

Contingent beneficiary

Answer

Discretionary beneficiary

Question 7

What is the legal consequence of a beneficiary's interest being contingent?

Accepted Answer

The beneficiary's interest is subject to the occurrence of a specified event

Answer

The beneficiary has no present entitlement to the trust property

Answer

The beneficiary's interest cannot be assigned or transferred

Question 8

Which type of beneficiary has no specific or fixed share in the trust property?

Accepted Answer

Discretionary beneficiary

Answer

Vested beneficiary

Answer

Contingent beneficiary

Question 9

What are the three essential elements required to establish a valid charitable trust?

Accepted Answer

Charitable intent, public benefit, and certainty of objects

Answer

Charitable intent, private benefit, and certainty of objects

Answer

Public benefit, certainty of objects, and perpetuity

Question 10

Which of the following BEST defines vested beneficiary in a trust?

Accepted Answer

A beneficiary who has a present and indefensible right to the trust property

Answer

A beneficiary whose interest in the trust property is contingent upon a future event

Answer

A beneficiary who receives the income from the trust property but not the underlying asset

Answer

A beneficiary who is entitled to the trust property only if they survive the life tenant

Question 11

How can a trustee effectively identify a discretionary beneficiary in a trust document?

Accepted Answer

By recognizing terms like 'may,' 'can,' or language giving discretion to the trustee

Answer

By identifying beneficiaries who are given a specific share of the trust property

Answer

By relying solely on the purpose of the trust and the settlor's intent

Answer

By applying the legal principle of primogeniture

Question 12

Which primary fiduciary duty do trustees owe to the beneficiaries of a trust?

Accepted Answer

To act in the best interests of the beneficiaries

Answer

To safeguard the trust property

Answer

To regularly provide financial statements to the beneficiaries

Answer

To strictly adhere to the terms outlined in the trust document

Question 13

What crucial role does the rule against perpetuities play in the context of trusts?

Accepted Answer

It prevents trusts from continuing indefinitely

Answer

It ensures trusts are utilized for the benefit of future generations

Answer

It empowers trustees to terminate trusts at any given time

Answer

It has no impact on trusts

Question 14

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

Accepted Answer

A bare trust grants the trustee no discretion in distributing trust assets, unlike a discretionary trust which allows for broad discretion.

Answer

A discretionary trust grants the trustee no discretion in distributing trust assets, unlike a bare trust which allows for broad discretion.

Answer

There is no meaningful distinction between these two types of trusts.

Answer

A bare trust is more frequently used for tax planning, whereas a discretionary trust is more frequently used for estate planning.

Question 15

What is the settlor's primary responsibility in a trust arrangement?

Accepted Answer

Establishing the trust and transferring assets into it

Answer

Managing the trust and distributing its assets

Answer

Enforcing the terms and conditions of the trust

Answer

Representing the interests of the trust's beneficiaries

Question 16

What is the key difference between a trust and a will?

Accepted Answer

A trust is established while the settlor is living, whereas a will becomes effective after their passing.

Answer

A will is established while the testator is living, whereas a trust becomes effective after their passing.

Answer

There is no meaningful distinction between a trust and a will.

Answer

A trust offers more flexibility than a will, while a will is more legally binding than a trust.

Question 17

Which type of beneficiary receives a share of the trust property based on the trustee's discretion?

Accepted Answer

Discretionary beneficiary

Answer

Contingent beneficiary

Answer

Vested beneficiary

Answer

Remainderman

Question 18

A contingency that must occur before a beneficiary becomes vested in their interest is called a:

Accepted Answer

Condition precedent

Answer

Condition subsequent

Answer

Forfeiture clause

Answer

Divesting clause

Question 19

A beneficiary who is given a share of the trust property after the termination of the trust is known as a:

Accepted Answer

Vested remainderman

Answer

Contingent remainderman

Answer

Life tenant

Answer

Reversionary interest holder

Question 20

Which of the following is a way to protect the interests of unborn and unascertained beneficiaries in a trust?

Accepted Answer

Both of the above

Answer

Appointing a guardian ad litem

Answer

Creating a protective trust

Question 21

Which of the following is NOT a potential conflict of interest that can arise between beneficiaries and trustees in a trust?

Accepted Answer

Regular communication

Answer

Self-dealing

Answer

Undue influence

Answer

Diversion of trust assets

Question 22

A contingent beneficiary is one who:

Accepted Answer

Has a future interest in the trust property dependent on the occurrence of an uncertain event

Answer

Receives the trust property outright upon the settlor's death

Answer

Can choose to receive the trust property or not

Question 23

Which type of beneficiary has the most extensive rights?

Accepted Answer

Vested beneficiary

Answer

Income beneficiary

Answer

Contingent beneficiary

Answer

Discretionary beneficiary

Question 24

A settlor creates a trust that distributes income to their spouse for life and then the remainder to their children. Which type of beneficiary are the children?

Accepted Answer

Vested remainderman

Answer

Income beneficiary

Answer

Contingent remainderman

Answer

Discretionary beneficiary

Question 25

In a trust, the settlor grants the trustee the power to distribute income and principal to designated beneficiaries. What type of beneficiaries are these?

Accepted Answer

Discretionary beneficiaries

Answer

Remaindermen

Answer

Contingent beneficiaries

Answer

Vested beneficiaries

Question 26

Which of the following statements about contingent beneficiaries is true?

Accepted Answer

Their interest in the trust property may vest or fail depending on the occurrence of a specified event

Answer

They have an immediate right to the trust property

Question 27

A trust document states that the trustee shall distribute the trust property 'to such of my children as my trustee shall select.' What type of beneficiaries are the children?

Accepted Answer

Discretionary beneficiaries

Answer

Vested beneficiaries

Answer

Contingent beneficiaries

Answer

Remaindermen