I85PREP
⌘ K
IFSP Trusts Foundation Certificate study materials
IFSP Trusts Foundation Certificate study resources

IFSP Trusts Foundation Certificate practice questions

One question at a time. Build your IFSP Trusts Foundation Certificate understanding.

First 50 of 198 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Trusts Law

Under the general law of trusts, which combination of elements is required for an express private trust to arise?

  1. Intention, a beneficiary who is sui juris and a protector
  2. A deed, a trustee company and a court order
  3. Certainty of intention, certainty of subject matter and certainty of objects Correct answer.
  4. Certainty of intention, consideration and registration

Explanation

An express trust requires the three certainties: intention to create a trust, identifiable trust property, and identifiable beneficiaries or purposes. Consideration is not needed because a trust is not a contract, and registration is not a general requirement of validity.

Question 2Trusts Law

A settlor transfers £200,000 to a trustee 'to hold for such of my employees as the trustee shall select'. Which requirement is most clearly satisfied by this wording?

  1. Certainty of subject matter, because the amount is fixed
  2. Certainty of objects, because the class of employees is defined Correct answer.
  3. Certainty of intention, because the word 'trust' appears
  4. Certainty of duration, because the class will close

Explanation

A fixed sum and a defined class of employees give certainty of subject matter and certainty of objects respectively; the wording identifies who may benefit. The quoted words do not themselves establish intention to impose a trust obligation, and no duration is stated.

Question 3Trusts Law

Which statement correctly describes the position of a beneficiary under a fixed interest trust?

  1. The beneficiary is personally liable for the trustee's breaches
  2. The beneficiary has an equitable proprietary interest in the trust property Correct answer.
  3. The beneficiary must be consulted on every investment decision
  4. The beneficiary holds legal title to the trust assets

Explanation

Beneficiaries under a fixed trust hold equitable interests that are proprietary in nature and can be enforced against the trustee. Legal title rests with the trustee, and beneficiaries are not personally liable for the trustee's wrongdoing.

Question 4Trusts Law

A trustee mixes trust money with personal funds in a single bank account. What is the primary consequence in trust law?

  1. The beneficiaries become unsecured creditors of the trustee
  2. The trust loses its proprietary claim over the mixed fund
  3. The trustee bears the burden of identifying which funds are trust property Correct answer.
  4. The mixing is permitted provided interest is paid to beneficiaries

Explanation

Where a trustee mixes trust and personal money, the trustee must disentangle the fund and, in doubtful cases, the presumption operates against the trustee. Beneficiaries retain an equitable proprietary claim over the mixed fund rather than becoming mere creditors.

Question 5Trusts Law

Which of the following best describes a resulting trust arising on failure of an express trust?

  1. The trustee acquires the beneficial interest personally
  2. The beneficial interest returns to the settlor or the settlor's estate Correct answer.
  3. The beneficial interest passes to the Crown absolutely
  4. The property is held for the settlor's creditors

Explanation

When an express trust fails or is incomplete, the beneficial interest typically results back to the settlor or the settlor's estate. This is automatic and does not depend on any intention to create a new trust.

Question 6Trusts Law

A trustee wishes to delegate investment management to a professional adviser. Which statement reflects the standard position under trustee legislation?

  1. Delegation discharges the trustee from any oversight of the adviser
  2. Delegation is prohibited for all trustees without a court order
  3. Delegation permanently transfers the trustee's fiduciary duties to the adviser
  4. Delegation is permitted where the trustee retains a duty to review the arrangement Correct answer.

Explanation

Modern trustee legislation generally permits collective delegation of investment functions where the trustee keeps the arrangement under review and remains accountable. The trustee's core fiduciary duties are not transferred away by delegation.

Question 7Trusts Law

Which fiduciary duty prevents a trustee from buying trust property for the trustee's own account without authorisation?

  1. The equitable doctrine of laches
  2. The rule against perpetuities
  3. The rule in Saunders v Vautier
  4. The self-dealing rule Correct answer.

Explanation

The self-dealing rule renders a purchase of trust property by the trustee voidable at the instance of the beneficiaries, because of the conflict of interest. It applies even where the trustee pays a fair price, unless authorised by the trust instrument or the court.

Question 8Trusts Law

Which of the following is an essential characteristic of a charitable trust?

  1. It must have identifiable individual beneficiaries
  2. It must be limited to a maximum duration of 21 years
  3. It must be created by royal charter
  4. It must be for a purpose that is exclusively charitable and for public benefit Correct answer.

Explanation

A charitable trust requires a purpose falling within the recognised charitable heads and conferring public benefit, and the purpose must be exclusively charitable. It does not need identifiable individual beneficiaries, which distinguishes it from a private trust.

Question 9Trusts Law

A testator leaves '£50,000 to my trustee to distribute among my loyal friends as the trustee thinks fit'. Which ground of invalidity is most likely to arise?

  1. Failure of certainty of subject matter
  2. Invalid execution of the will
  3. Lack of capacity of the testator
  4. Uncertainty of objects Correct answer.

Explanation

A discretionary trust requires conceptual certainty about who falls within the class; 'loyal friends' is too vague to define. The sum is certain and there is no indication of incapacity or defective execution, so uncertainty of objects is the operative problem.

Question 10Trusts Law

A settlor declares that she holds a painting 'on trust for my sister absolutely' but keeps the painting in her own home and treats it as her own. What is the most accurate analysis?

  1. A valid trust may exist because a declaration of trust requires no transfer of possession Correct answer.
  2. The trust is void because a painting cannot be trust property
  3. No trust can exist because the painting was not physically delivered
  4. The trust fails because the sister gave no consideration

Explanation

A declaration of trust by the owner is complete without any transfer of the asset, because the settlor constitutes herself trustee. Physical delivery and consideration are not required, and tangible chattels can certainly be held on trust.

Question 11Trusts Law

Which statement best explains the rule in Saunders v Vautier?

  1. A trustee may terminate a trust where the fund falls below a stated value
  2. A settlor may revoke a trust unless the trust instrument reserves the power
  3. Beneficiaries may remove a trustee without any court involvement at any time
  4. Adult beneficiaries with full capacity and collectively entitled to the whole beneficial interest may terminate the trust Correct answer.

Explanation

The rule allows beneficiaries who are of age, have capacity, and together own the entire beneficial interest to call for the trust property and end the trust. It reflects the proprietary nature of their interests rather than any power of the trustee or settlor.

Question 12Trusts Law

A trustee invests the entire trust fund in a single speculative start-up company, contrary to the trust's stated objective of capital preservation. Which duty has most directly been breached?

  1. The duty to keep accounts
  2. The duty to insure trust property
  3. The duty to distribute income promptly
  4. The duty to invest prudently and in accordance with the trust terms Correct answer.

Explanation

Trustees must invest prudently and within the terms of the trust, considering diversification and the needs of the beneficiaries. Concentrating the whole fund in a speculative venture conflicts with the stated preservation objective and breaches that duty.

Question 13Trusts Law

A trustee of a discretionary trust pays £10,000 to a person who is not among the defined class of beneficiaries. What is the trustee's position?

  1. The trustee is personally liable to restore the fund unless relief is granted Correct answer.
  2. The payment is valid if the recipient acted in good faith
  3. The beneficiaries must bear the loss as part of trust expenses
  4. The trustee is automatically excused because the payment was made honestly

Explanation

A distribution to a non-object is a breach of trust, and the trustee must restore the fund personally. Honest belief alone does not excuse the trustee, though statutory or equitable relief may be available in appropriate circumstances.

Question 14Trusts Law

Which remedy is proprietary in nature and allows a beneficiary to assert a claim against trust property in the hands of a third party?

  1. An order for an account of profits
  2. A mandatory injunction
  3. Specific performance of the trust deed
  4. Tracing Correct answer.

Explanation

Tracing is the process by which a beneficiary follows trust property into the hands of a third party or into substituted assets, supporting a proprietary claim. The other remedies listed are personal or coercive rather than proprietary in this sense.

Question 15Trusts Law

A person receives trust property as a volunteer with notice that the transfer was in breach of trust. Which claim is most likely available against that person?

  1. A claim in knowing receipt Correct answer.
  2. A claim in deceit
  3. A claim for breach of a fiduciary duty owed by that person
  4. A claim for breach of contract

Explanation

Knowing receipt allows a beneficiary to recover trust property, or its value, from a recipient who took as a volunteer with notice of the breach. The recipient owes no prior fiduciary duty to the trust and is not liable in deceit or contract.

Question 16Trusts Law

Which principle governs a trustee's power to apply income for the maintenance of a minor beneficiary under a typical trust instrument?

  1. The power requires the consent of the minor's guardian in all cases
  2. The power may be exercised only if the trust instrument or statute confers it Correct answer.
  3. The power may be exercised only with court approval
  4. The power arises automatically whenever a beneficiary is under 18

Explanation

Powers of maintenance and advancement are conferred by the trust instrument or by statute and must be exercised within their terms. They are not automatic incidents of minority, and court approval is not generally required.

Question 17Trusts Law

A trustee holds shares in a company and receives a rights issue offer. Which course best reflects the trustee's duty when deciding whether to take up the rights?

  1. Transfer the decision to the beneficiaries without any recommendation
  2. Take up the rights regardless of the trust's liquidity
  3. Consider the merits of the investment in light of the trust's objectives and available funds Correct answer.
  4. Decline automatically because rights issues always dilute value

Explanation

A rights issue is an investment decision that must be assessed against the trust's investment policy, diversification and liquidity needs. Automatic acceptance or rejection ignores the trustee's duty of prudent assessment.

Question 18Trusts Law

Which statement about a protective trust is accurate?

  1. It automatically terminates when the beneficiary reaches 25
  2. It requires the consent of the beneficiary's creditors to be valid
  3. It prevents the beneficiary from ever receiving income
  4. It typically converts a beneficiary's interest into a discretionary trust on a triggering event Correct answer.

Explanation

A protective trust usually gives the beneficiary a determinable life interest that ends on a specified event such as attempted alienation, whereupon a discretionary trust arises. It does not eliminate benefits entirely, and creditor consent is not a validity requirement.

Question 19Trusts Law

A trustee is also a beneficiary under the same trust. Which approach best manages the conflict of interest?

  1. The trustee may vote freely because the trust instrument is silent
  2. The trustee must resign immediately in every case
  3. The conflict is automatically cured by disclosure to the other beneficiaries
  4. The trustee should not participate in decisions affecting that personal interest and should consider seeking authorisation Correct answer.

Explanation

Where a trustee has a personal interest in a decision, the trustee should abstain from the relevant deliberations and votes and consider obtaining authorisation under the instrument or from the court. Disclosure alone does not neutralise the conflict.

Question 20Trusts Law

A trustee of a will trust discovers that the testator's earlier will left the same assets on different trusts. Which duty is engaged when deciding how to respond?

  1. The duty to destroy the later will
  2. The duty to distribute immediately without investigation
  3. The duty to act impartially among beneficiaries and to seek directions where necessary Correct answer.
  4. The duty to prefer the beneficiaries under the earlier will

Explanation

Trustees must act impartially and, where the correct construction of competing instruments is unclear, may apply to the court for directions. Preferring one set of beneficiaries or acting hastily would breach that duty.

Question 21Trusts Law

Which of the following distinguishes a bare trust from a fixed interest trust?

  1. A bare trust cannot hold land
  2. A bare trustee holds property for a beneficiary absolutely with no further duties of management Correct answer.
  3. A fixed interest trust gives the trustee discretion over distributions
  4. A bare trust must have multiple beneficiaries

Explanation

In a bare trust the beneficiary is absolutely entitled and the trustee's role is simply to hold the property to the beneficiary's order. Fixed interest trusts can involve successive interests, and a bare trust may hold land.

Question 22Trusts Law

A trustee uses trust funds to purchase a personal residence registered in the trustee's own name. Which proprietary remedy is most appropriate for the beneficiaries?

  1. Seeking an account of profits from the trustee's employer
  2. Applying for a bankruptcy order against the trustee
  3. Claiming damages for misrepresentation
  4. Asserting an equitable interest in the residence through tracing Correct answer.

Explanation

Beneficiaries can trace trust money into the property purchased with it and assert an equitable proprietary interest in that asset. Claims in misrepresentation, against third-party employers, or bankruptcy proceedings do not provide the same proprietary recovery.

Question 23Trusts Law

A discretionary trustee is considering whether to make an appointment to a beneficiary who is facing insolvency. Which consideration is most relevant to the validity of the appointment?

  1. Whether the appointment is made in good faith within the class and for a proper purpose Correct answer.
  2. Whether the trustee obtains the settlor's approval
  3. Whether the beneficiary has consented in writing
  4. Whether the appointment is registered with the court

Explanation

A discretionary appointment is valid if it is made in good faith, within the defined class of objects, and for a proper purpose; the trustee must genuinely consider the matter. Consent, settlor approval and court registration are not general requirements.

Question 24Trusts Law

A trustee holds a leasehold property that is deteriorating. Which duty requires the trustee to consider whether to repair, sell or surrender the lease?

  1. The duty to manage trust property with due care and to act in the beneficiaries' best interests Correct answer.
  2. The duty to avoid self-dealing
  3. The duty to obtain the beneficiaries' unanimous consent for all decisions
  4. The duty to keep the trust secret

Explanation

Trustees must manage trust assets with reasonable care and skill, weighing options such as repair, sale or surrender in the beneficiaries' interests. Unanimous beneficiary consent is not a precondition for ordinary management decisions.

Question 25Trusts Law

A beneficiary challenges an investment decision of the trustees five years after learning of it. Which factor is most relevant to whether the claim is barred?

  1. Whether the settlor is still alive
  2. The number of trustees in office at the time
  3. Whether the trust is discretionary or fixed
  4. The statutory limitation period and the equitable doctrine of laches Correct answer.

Explanation

Claims against trustees are subject to statutory limitation periods and the equitable doctrine of laches, which considers delay and prejudice. The number of trustees, the trust type and the settlor's status do not determine limitation.

Question 26Trusts Law

A settlor transfers legal title to a portfolio of shares to two individuals, instructing them to hold it for a named beneficiary who is entitled to all the income and capital. Which classification best describes this arrangement?

  1. A discretionary trust
  2. An express fixed trust Correct answer.
  3. A constructive trust
  4. A resulting trust

Explanation

Where a settlor expressly declares the terms and the beneficiary's interest is defined and fixed, the arrangement is an express fixed trust. The trustees hold legal title while the beneficiary owns the equitable interest.

Question 27Trusts Law

For a valid express private trust to arise, which combination of certainties must be established?

  1. Objects, formality and registration
  2. Intention, subject matter and objects Correct answer.
  3. Subject matter, consideration and capacity
  4. Intention, consideration and formality

Explanation

The three certainties required for a valid express trust are certainty of intention, certainty of subject matter and certainty of objects. Consideration and registration are not part of this test, and formality requirements are separate.

Question 28Trusts Law

Which characteristic distinguishes a trust from a simple contractual arrangement between two parties?

  1. The trustee must always be a professional body corporate
  2. The trustee owes duties enforceable by a beneficiary who need not be a party to any contract Correct answer.
  3. The beneficiary must provide consideration to the trustee
  4. The arrangement must be registered to be enforceable

Explanation

A defining feature of a trust is that the beneficiary holds an equitable interest enforceable against the trustee even though the beneficiary gave no consideration and is not party to any agreement. Contractual rights generally belong only to the contracting parties.

Question 29Trusts Law

A settlor executes a deed declaring that she now holds her shares in a private company on trust for her nephew. What type of trust has been created?

  1. A declaration of trust by the settlor as trustee Correct answer.
  2. A testamentary trust
  3. A resulting trust
  4. A charitable trust

Explanation

Where the owner of property declares that she holds it on trust for another, she becomes trustee and the arrangement is a declaration of trust. It takes effect immediately rather than on death.

Question 30Trusts Law

Which duty requires a trustee to keep trust property separate from personal assets and to keep accurate records of dealings?

  1. The duty to act impartially between beneficiaries
  2. The duty to provide information to beneficiaries
  3. The duty to safeguard trust assets Correct answer.
  4. The duty to invest prudently

Explanation

Safeguarding trust assets involves keeping them distinct from the trustee's own property and maintaining clear records. This separation underpins the ability to trace trust property and prevents confusion of funds.

Question 31Trusts Law

A trustee of a fixed interest trust must balance the interests of a life tenant entitled to income and a remainderman entitled to capital. Which duty is engaged when choosing between high-income and growth investments?

  1. The duty to account
  2. The duty to take advice
  3. The duty to act impartially Correct answer.
  4. The duty to avoid self-dealing

Explanation

The duty of impartiality requires trustees to balance fairly the competing interests of income and capital beneficiaries when making investment choices. Neither class may be unfairly favoured.

Question 32Trusts Law

A trustee of a discretionary trust has power to appoint capital among a defined class. Which statement correctly describes the beneficiaries' rights before an appointment is made?

  1. They hold legal title jointly with the trustee
  2. They have no standing to enforce the trust at all
  3. They each own an equal fixed share of the capital
  4. They have a hope or expectancy of consideration but no fixed proprietary interest in any part of the fund Correct answer.

Explanation

Before the trustees exercise the discretion, members of the class have only a hope of being considered, not a fixed interest in the fund. They can still enforce the proper administration of the trust.

Question 33Trusts Law

Which of the following is required for a trust to qualify as charitable?

  1. The trust must serve a purpose recognised as charitable and provide a public benefit Correct answer.
  2. The trust must have at least three trustees
  3. The trust must distribute income to named private individuals
  4. The trust must be registered as a company

Explanation

A charitable trust must pursue a purpose within the recognised categories of charity and confer a benefit on the public or a sufficient section of it. Private benefit to named individuals is inconsistent with charity.

Question 34Trusts Law

A testator's will leaves 'such of my cousins as my trustees shall select to receive £10,000 each'. Which certainty is most directly tested by this wording?

  1. Certainty of subject matter
  2. Certainty of intention
  3. Certainty of objects Correct answer.
  4. Certainty of formality

Explanation

The clause identifies the recipients by reference to a class, so the key question is whether the objects are defined with sufficient certainty. For a discretionary power of this kind the class must be conceptually certain.

Question 35Trusts Law

A settlor transfers £100,000 to trustees on terms that they pay the income to his widow for life and then distribute the capital to his children. Which interest does the widow hold?

  1. An absolute interest in both income and capital
  2. A life interest in income only Correct answer.
  3. A reversionary interest in capital
  4. A discretionary interest in income and capital

Explanation

The widow is entitled to income for her lifetime, which is a life interest, while the capital is preserved for the children as remaindermen. Her interest is limited to income during her life.

Question 36Trusts Law

Trustees hold a fund for 'my old friends in the village'. Which outcome is most likely when the validity of this trust is challenged?

  1. The trust is valid as a charitable trust for the relief of poverty
  2. The trust is valid because the trustees can identify friends themselves
  3. The trust fails for uncertainty of objects because the class is not conceptually certain Correct answer.
  4. The trust fails only if the trustees decline to act

Explanation

A class described only as 'old friends' lacks a clear conceptual definition, so the objects are uncertain and the trust fails. For a fixed trust the beneficiaries must be ascertainable, and vague descriptions do not satisfy this.

Question 37Trusts Law

A trustee of a family trust wishes to buy a cottage that forms part of the trust's land portfolio for personal use. What is the trustee's position?

  1. The purchase is voidable by the beneficiaries because it amounts to self-dealing Correct answer.
  2. The purchase is permitted if the trustee pays full market value
  3. The purchase is permitted because land is not a wasting asset
  4. The purchase is permitted if the other trustees consent

Explanation

A trustee may not purchase trust property for personal benefit, and such a transaction is voidable by the beneficiaries regardless of whether fair value was paid. The strict rule removes any temptation to profit from the fiduciary position.

Question 38Trusts Law

A trustee holds a minority shareholding in a trading company. A takeover offer is made. Which duty is engaged when deciding whether to accept?

  1. The duty to act in the best financial interests of the beneficiaries Correct answer.
  2. The duty to preserve the trust's original investments unchanged
  3. The duty to consult the settlor before deciding
  4. The duty to prefer capital growth over income at all times

Explanation

Trustees must make investment decisions, including whether to accept a takeover offer, in the best financial interests of the beneficiaries. They must consider the merits rather than cling to the original holding.

Question 39Trusts Law

Trustees are given power to apply income for the maintenance of a minor beneficiary. Which factor is central to the proper exercise of this power?

  1. The payment must equal the whole of the trust income
  2. The amount should be reasonable in light of the beneficiary's needs and circumstances Correct answer.
  3. The payment must be delayed until the beneficiary reaches adulthood
  4. The payment must be approved by the court in every case

Explanation

A maintenance power allows trustees to apply income for a minor's benefit where the amount is reasonable in the circumstances. Trustees consider the beneficiary's needs and the size of the fund rather than applying all income automatically.

Question 40Trusts Law

A trustee holds shares that are subject to a rights issue requiring payment. Which course best reflects the trustee's duty?

  1. Take up the rights automatically without considering the cost
  2. Ignore the offer because it was not part of the original trust terms
  3. Transfer the rights to a beneficiary free of charge
  4. Consider whether taking up the rights is in the beneficiaries' interests and act accordingly Correct answer.

Explanation

Trustees must assess whether exercising rights is financially beneficial to the trust, considering cost and prospects. They may take up, sell or decline the rights according to the beneficiaries' interests.

Question 41Trusts Law

A trustee learns that a beneficiary has been overpaid from the trust. Which duty most directly requires the trustee to consider recovering the overpayment?

  1. The duty to act unanimously
  2. The duty to avoid delegation
  3. The duty to publish accounts
  4. The duty to safeguard the trust fund Correct answer.

Explanation

Recovering an overpayment protects the fund for all beneficiaries and falls within the duty to safeguard trust assets. Trustees must consider whether recovery is practicable and in the interests of the trust as a whole.

Question 42Trusts Law

Two trustees disagree about whether to sell a trust asset. The trust instrument is silent on decision-making. What is the general position?

  1. The settlor must decide the dispute
  2. The trustee with the larger shareholding decides
  3. The majority decision always binds
  4. Trustees must act unanimously unless the trust instrument provides otherwise Correct answer.

Explanation

Where trustees hold office jointly, the general rule is that they must act unanimously unless the trust instrument authorises majority decisions. A majority cannot override a dissenting trustee in the absence of such a provision.

Question 43Trusts Law

A trustee is also a beneficiary under the same trust. Which approach best manages the resulting conflict?

  1. The trustee may decide matters if the co-trustee agrees
  2. The trustee should resign as beneficiary to remove the conflict
  3. The trustee should not participate in decisions affecting the trustee's own entitlement and should seek independent oversight Correct answer.
  4. The trustee may vote freely because beneficiaries are entitled to be heard

Explanation

A trustee who is also a beneficiary is conflicted when decisions affect that personal interest, and should abstain from those decisions with independent oversight where needed. This protects the trust from challenge on conflict grounds.

Question 44Trusts Law

A trustee invests the whole trust fund in a single new technology company. Which standard is used to judge whether the trustee has breached the duty of care?

  1. The standard of a prudent person investing on behalf of another Correct answer.
  2. The standard of the settlor's original intentions only
  3. The standard of a professional fund manager in all cases
  4. The standard of the highest return available in the market

Explanation

Trustees are judged by the standard of a prudent person investing on behalf of another, taking advice where appropriate. A professional trustee is held to a higher standard reflecting professional expertise.

Question 45Trusts Law

A trustee of a will trust discovers an earlier will that left the same assets on different trusts. Which duty is most directly engaged?

  1. The duty to distribute assets as quickly as possible
  2. The duty to maximise the trustee's own remuneration
  3. The duty to prefer the later will regardless of validity
  4. The duty to give effect to the testator's valid testamentary intentions Correct answer.

Explanation

Trustees must administer the estate and trust according to the testator's valid testamentary intentions, which may require investigating which will is legally effective. Speed or self-interest cannot override that duty.

Question 46Trusts Law

A trustee of a leasehold property notices that the building is deteriorating and the lease has limited years remaining. Which duty requires the trustee to consider repair, sale or other action?

  1. The duty to appoint a new trustee
  2. The duty to insure against all possible losses
  3. The duty to distribute income annually
  4. The duty to manage trust property prudently Correct answer.

Explanation

Prudent management requires trustees to review the condition and value of trust property and decide whether to repair, sell or take other steps. Inaction in the face of deterioration may itself be a breach.

Question 47Trusts Law

A beneficiary challenges an investment decision five years after learning of it. Which factor is most relevant to whether the claim is barred by acquiescence?

  1. Whether the trustee kept written minutes of the decision
  2. Whether the trust deed mentions the investment power
  3. Whether the investment produced any income at all
  4. Whether the beneficiary knew of the right to complain and stood by while the trustee acted Correct answer.

Explanation

Acquiescence bars a claim where a beneficiary, with full knowledge of the facts and rights, stands by and allows the trustee to act. Mere delay without knowledge is not enough.

Question 48Trusts Law

Trustees hold property on trust for A for life, then for B absolutely. The trustees want to sell the property and invest the proceeds. Which statement is correct?

  1. They may sell and keep the proceeds personally if they reinvest later
  2. They may sell only with the consent of the settlor
  3. They may sell if the trust instrument or statute confers a power of sale, holding the proceeds on the same trusts Correct answer.
  4. They may never sell trust property once a life interest has arisen

Explanation

A power of sale, typically conferred by the trust instrument or statute, allows trustees to convert property and hold the proceeds on the existing trusts. The interests of the life tenant and remainderman continue in the proceeds.

Question 49Trusts Law

A trustee mixes trust money with personal funds in a single bank account and later withdraws money for personal use. Which principle best assists the beneficiaries?

  1. The bank is liable for the trustee's misuse of funds
  2. The beneficiaries must prove the exact coins and notes taken
  3. The trustee bears the burden of showing which funds were personal, and uncertainty is resolved against the trustee Correct answer.
  4. The trust loses priority because the money was mixed

Explanation

Where a trustee wrongfully mixes trust and personal funds, the trustee bears the burden of disentangling them, and any uncertainty is resolved in favour of the beneficiaries. This protects the trust against the consequences of the trustee's own breach.

Question 50Trusts Law

A trustee holds a discretionary power to add beneficiaries to the class. Which constraint applies to the exercise of that power?

  1. It may be exercised only with the consent of all existing beneficiaries
  2. It may be exercised to benefit the trustee personally if the trustee is also an object
  3. It must be exercised in good faith, for the purpose for which it was conferred and within the class limits Correct answer.
  4. It may be exercised at any time after the trust has been fully distributed

Explanation

Fiduciary powers must be exercised honestly, for the purpose for which they were granted and within any limits in the trust instrument. A power cannot be used to benefit the trustee improperly or after the fund has been distributed.