Contents
Unit 1..................................................................................................................... 2
Unit 2................................................................................................................... 12
Unit 3................................................................................................................... 25
Unit 4................................................................................................................... 33
Unit 5................................................................................................................... 42
Unit 6................................................................................................................... 57
Unit 7................................................................................................................... 66
Unit 8................................................................................................................... 82
Hi! These are my PGDL answers to the Equity & Trusts Module. I attended the
course at the Moorgate campus and passed this module with an overall
distinction, as well as an overall distinction on the course. I am happy to answer
your questions on this documents – email me here – .
Hope you find this helpful!
,Unit 1
You are a solicitor in the private client department of ULaw LLP. Your supervising solicitor
interviewed Joanne Kearns yesterday and recording her instructions in the following attendance
note.
Please read through the attendance note in conjunction with the Practice Note; “Creating a trust:
taking initial instructions” in Practical Law Private Client. We will be considering the advice to be
given to Joanne Kearns in the Engage section of the Unit. As you review the attendance note,
makes notes on Mrs. Kearns’ issues, why and how a trust may enable her to achieve her goals
and what type of trust(s) may be beneficial in her circumstances.
ATTENDANCE NOTE
Date……
File ref: KB/K234
Time taken: 30 minutes
Name of client: Mrs Joanne Kearns (Mrs K)
Address: The Laurels, Higher Turnbury, Gloucestershire, GU4 8PJ
Tel no: 01234 678521
Age 64
Family
Mrs K is a widow. She has two children and two grandchildren.
Daughter, Anna Rogers aged 36. Married to Peter. Two children Freddie (aged 8) and
Lottie (aged 6).
Son, Gavin, aged 25. Unmarried.
Mrs K’s husband died last year leaving all his estate to her.
Will
Mrs K tore up her will when her husband died because it left everything to him. She appreciates
that she needs to make a new will and will make a further appointment for that purpose.
Assets
Mrs K owns around £4.5 million worth of assets comprising:
House (The Laurels) £1 million
, Shares in family company £2 million
Other investments (quoted shares and bonds) £1 million
Money in banks and building societies £500,000
Lifetime gift/trust
Mrs K’s accountant (Bob Hart of Hart, Rich, and Co.) has advised her to make lifetime gifts to
reduce the value of her estate which will be chargeable to inheritance tax when she dies. He has
suggested that she gives away the current nil-rate band of £325,000 now and repeats this
exercise every seven years. She says she can manage very well without the funds, but she is not
happy with the idea that her children will have complete control over the money. On the other
hand, there is nobody else to whom she would like to give the money. Mrs K has a younger
brother and an adult niece and nephew, but she does not feel the need to include them as they
are all financially secure.
Her daughter, Anna, is good-natured but rather weak. Her husband, Peter dominates her. Mrs K
says he has never done “a decent day’s work” and she feels that he is sponging from her
daughter. Peter spends his time dreaming about ways of making a fortune through hare-brained
schemes which involve the minimum of effort on his part and are sure to lead to masses of
money disappearing down the drain. Mrs K is adamant that Peter should not have a penny of
her money and fears that if she gives anything to Anna, he will spend the lot on one of his
“business ventures”. Mrs K is also worried that the marriage might not last.
Gavin has not settled down yet. He enjoys traveling around the world and has never had a
steady job. She wants him to have enough money to be “comfortably off” but does not feel that
he is sufficiently mature to manage a fortune wisely.
Advice 1
Mrs K wants advice on the best way for her to give away her £325,000. Your advice should
address the following issues:-
1. Why Mrs Kearns should set up a trust or trusts rather than make outright gifts.
Making a lifetime gift has the advantage of reducing the value of the estate and subsequent
payable IHT. A more beneficial option, in terms of retention of control and tax savings, is the
option of creating a trust. There are two ways an outright gift can be tuned into a trust (Milroy v
Lord)
- a transfer to trustees to hold on trust for the person to be benefited;
- or during their lifetime, a declaration of self as trustee for the person to be benefitted.
Mrs. Kearns may consider holding the assets for the beneficiaries as a trustee herself, or appoint
other trustees in her stead. If she chooses to only be the settlor and not a trustee, she will not
have any say in how the trust fund is put to use beyond the terms of her trust instrument.
2. Which types of trust(s) you would suggest Mrs. Kearns might consider in order to carry
out her wishes and why. Are there any disadvantages to your suggested options that Mrs
Kearns should be aware of?
Mrs. K may consider a discretionary trust or a fixed trust – both of these will be express trusts.
, Discretionary, would be where Mrs. K leaves it to the discretion of the trustees to distribute the
trust assets between the objects she lists in her will.
Control:
Creating a discretionary trust and making herself a trustee will give her the freedom to control
the distribution and running of the trust assets. Additionally, the beneficiaries will not be able to
bring any claims or demands against the trustees other than seeking for the trust to be
administered reasonably well.
Ending the trust
Moreover, there is only a limited and uncertain scope for the beneficiaries to apply the rule in
Saunders v Vautier to end the trust as this has never been explored in any depth beyond a mere
iht
Changing circumstances
An advantage of using a discretionary trust is also - a discretionary trust allows the trustees to
respond to changes in circumstances when the time comes for distribution of the trust property.
With a discretionary trust, Mrs. may even like to include her wealthier family members if she
would like there to be a fall-back support for them.
Duties of trustees
The only duty the trust will owe to discretionary objects is that they are entitled to see ‘trust
documents’ and trustees have a duty to provide them (Schmidt v Rosewood Trust), subject to
confidentiality. There is also a reasonable expectation that the discretion will be exercised in
their favour (reference on pg 128).
A fixed trust is where Mrs. K outlines how exactly she wants the trust assets to be spent and the
trustees will have to follow her named instructions.
Control – neither she, nor her trustees will have the power to change the way the trust
assets are spent, unless there is an exceptional intervention by the court.
Ending the trust – the beneficiaries may apply Saunders v Vautier to end the trust
prematurely and claim the assets. They may even sell their beneficial interests.
Trustees owe beneficiaries more duties and can be held liable for falling short of them.
They can also be requested to invoke their powers of advancement.
3. How Mrs Kearns would go about creating any trust.
There are two ways an outright gift can be tuned into a trust (Milroy v Lord)
1. a transfer to trustees to hold on trust for the person to be benefited;
2. or during their lifetime, a declaration of self as trustee for the person to be benefitted.
(1) For a valid trust to be created with other trustees, there must be two things established:
valid declaration and valid constitution:
For a valid declaration, the three certainties must be satisfied – the certainty of intention, objects
and subject matter (more on pg 13 of Stuvia notes). Under the certainty of objects, the
declaration must not offend the beneficiary principle and the rules against perpetuities (pg 14
and 15 Stuvia).
Where the trust concerns land, it must also comply with the correct formalities as specified in s
53(1)(b) LPA 1925.
Once declaration is valid, it must also comply with the correct rules of constitution.
The legal title must be validly transferred to all the trustees, this will depend on the type
of asset, see pg 16 Stuvia.
Unit 1..................................................................................................................... 2
Unit 2................................................................................................................... 12
Unit 3................................................................................................................... 25
Unit 4................................................................................................................... 33
Unit 5................................................................................................................... 42
Unit 6................................................................................................................... 57
Unit 7................................................................................................................... 66
Unit 8................................................................................................................... 82
Hi! These are my PGDL answers to the Equity & Trusts Module. I attended the
course at the Moorgate campus and passed this module with an overall
distinction, as well as an overall distinction on the course. I am happy to answer
your questions on this documents – email me here – .
Hope you find this helpful!
,Unit 1
You are a solicitor in the private client department of ULaw LLP. Your supervising solicitor
interviewed Joanne Kearns yesterday and recording her instructions in the following attendance
note.
Please read through the attendance note in conjunction with the Practice Note; “Creating a trust:
taking initial instructions” in Practical Law Private Client. We will be considering the advice to be
given to Joanne Kearns in the Engage section of the Unit. As you review the attendance note,
makes notes on Mrs. Kearns’ issues, why and how a trust may enable her to achieve her goals
and what type of trust(s) may be beneficial in her circumstances.
ATTENDANCE NOTE
Date……
File ref: KB/K234
Time taken: 30 minutes
Name of client: Mrs Joanne Kearns (Mrs K)
Address: The Laurels, Higher Turnbury, Gloucestershire, GU4 8PJ
Tel no: 01234 678521
Age 64
Family
Mrs K is a widow. She has two children and two grandchildren.
Daughter, Anna Rogers aged 36. Married to Peter. Two children Freddie (aged 8) and
Lottie (aged 6).
Son, Gavin, aged 25. Unmarried.
Mrs K’s husband died last year leaving all his estate to her.
Will
Mrs K tore up her will when her husband died because it left everything to him. She appreciates
that she needs to make a new will and will make a further appointment for that purpose.
Assets
Mrs K owns around £4.5 million worth of assets comprising:
House (The Laurels) £1 million
, Shares in family company £2 million
Other investments (quoted shares and bonds) £1 million
Money in banks and building societies £500,000
Lifetime gift/trust
Mrs K’s accountant (Bob Hart of Hart, Rich, and Co.) has advised her to make lifetime gifts to
reduce the value of her estate which will be chargeable to inheritance tax when she dies. He has
suggested that she gives away the current nil-rate band of £325,000 now and repeats this
exercise every seven years. She says she can manage very well without the funds, but she is not
happy with the idea that her children will have complete control over the money. On the other
hand, there is nobody else to whom she would like to give the money. Mrs K has a younger
brother and an adult niece and nephew, but she does not feel the need to include them as they
are all financially secure.
Her daughter, Anna, is good-natured but rather weak. Her husband, Peter dominates her. Mrs K
says he has never done “a decent day’s work” and she feels that he is sponging from her
daughter. Peter spends his time dreaming about ways of making a fortune through hare-brained
schemes which involve the minimum of effort on his part and are sure to lead to masses of
money disappearing down the drain. Mrs K is adamant that Peter should not have a penny of
her money and fears that if she gives anything to Anna, he will spend the lot on one of his
“business ventures”. Mrs K is also worried that the marriage might not last.
Gavin has not settled down yet. He enjoys traveling around the world and has never had a
steady job. She wants him to have enough money to be “comfortably off” but does not feel that
he is sufficiently mature to manage a fortune wisely.
Advice 1
Mrs K wants advice on the best way for her to give away her £325,000. Your advice should
address the following issues:-
1. Why Mrs Kearns should set up a trust or trusts rather than make outright gifts.
Making a lifetime gift has the advantage of reducing the value of the estate and subsequent
payable IHT. A more beneficial option, in terms of retention of control and tax savings, is the
option of creating a trust. There are two ways an outright gift can be tuned into a trust (Milroy v
Lord)
- a transfer to trustees to hold on trust for the person to be benefited;
- or during their lifetime, a declaration of self as trustee for the person to be benefitted.
Mrs. Kearns may consider holding the assets for the beneficiaries as a trustee herself, or appoint
other trustees in her stead. If she chooses to only be the settlor and not a trustee, she will not
have any say in how the trust fund is put to use beyond the terms of her trust instrument.
2. Which types of trust(s) you would suggest Mrs. Kearns might consider in order to carry
out her wishes and why. Are there any disadvantages to your suggested options that Mrs
Kearns should be aware of?
Mrs. K may consider a discretionary trust or a fixed trust – both of these will be express trusts.
, Discretionary, would be where Mrs. K leaves it to the discretion of the trustees to distribute the
trust assets between the objects she lists in her will.
Control:
Creating a discretionary trust and making herself a trustee will give her the freedom to control
the distribution and running of the trust assets. Additionally, the beneficiaries will not be able to
bring any claims or demands against the trustees other than seeking for the trust to be
administered reasonably well.
Ending the trust
Moreover, there is only a limited and uncertain scope for the beneficiaries to apply the rule in
Saunders v Vautier to end the trust as this has never been explored in any depth beyond a mere
iht
Changing circumstances
An advantage of using a discretionary trust is also - a discretionary trust allows the trustees to
respond to changes in circumstances when the time comes for distribution of the trust property.
With a discretionary trust, Mrs. may even like to include her wealthier family members if she
would like there to be a fall-back support for them.
Duties of trustees
The only duty the trust will owe to discretionary objects is that they are entitled to see ‘trust
documents’ and trustees have a duty to provide them (Schmidt v Rosewood Trust), subject to
confidentiality. There is also a reasonable expectation that the discretion will be exercised in
their favour (reference on pg 128).
A fixed trust is where Mrs. K outlines how exactly she wants the trust assets to be spent and the
trustees will have to follow her named instructions.
Control – neither she, nor her trustees will have the power to change the way the trust
assets are spent, unless there is an exceptional intervention by the court.
Ending the trust – the beneficiaries may apply Saunders v Vautier to end the trust
prematurely and claim the assets. They may even sell their beneficial interests.
Trustees owe beneficiaries more duties and can be held liable for falling short of them.
They can also be requested to invoke their powers of advancement.
3. How Mrs Kearns would go about creating any trust.
There are two ways an outright gift can be tuned into a trust (Milroy v Lord)
1. a transfer to trustees to hold on trust for the person to be benefited;
2. or during their lifetime, a declaration of self as trustee for the person to be benefitted.
(1) For a valid trust to be created with other trustees, there must be two things established:
valid declaration and valid constitution:
For a valid declaration, the three certainties must be satisfied – the certainty of intention, objects
and subject matter (more on pg 13 of Stuvia notes). Under the certainty of objects, the
declaration must not offend the beneficiary principle and the rules against perpetuities (pg 14
and 15 Stuvia).
Where the trust concerns land, it must also comply with the correct formalities as specified in s
53(1)(b) LPA 1925.
Once declaration is valid, it must also comply with the correct rules of constitution.
The legal title must be validly transferred to all the trustees, this will depend on the type
of asset, see pg 16 Stuvia.
