Wills administration and Trusts
A man dies leaving a validly executed will. He leaves the residue of his estate to his wife for life, remainder to his son on reaching the age of 21 years. The will also specifies that, in the event that the gift of the remainder to the son fails, the funds will pass to a named charity. When the man dies, his son is aged 18. The year after the man's death, his wife and son agree that they would like to end the trust and split the trust fund between them so that the man's wife receives 60% of the trust fund and the man's son receives 40% of the trust fund. View less Can the man's wife and son end the trust and split the funds in accordance with their agreement?
No, because although all the possible beneficiaries of the trust are in existence and ascertained, not all the beneficiaries are in agreement. explain: All the potential beneficiaries of the trust are in existence and ascertained. However, the man's son has not yet reached the age contingency of 21. He was 18 years old when the man died, so would have been 19 years old when the agreement was made with the man's wife about ending the trust, as this happened a year after the man's death. As the man's son has not yet reached the contingency age needed to receive the funds, there is a possibility that he could die before reaching the age of 21. If this happened, he would not have achieved a vested interest in the trust fund. Therefore, his interest in the trust would fail. If his interest fails, the will confirms that the funds will pass to the named charity instead of the son. This means that, in order for the trust to be brought to an end under the rule in Saunders v Vautier, the named charity would also have to agree to the ending of the trust. It is unlikely that the charity would agree to this.
A firm is acting for a client in the purchase of a property. At the start of the matter, the client sends the firm a cheque for £31,500 comprising £1,500 generally on account of costs and unpaid disbursements and £30,000 to use as the deposit for the purchase. Can the firm pay the cheque into the business bank account?
No, because the entire receipt is client money, and the firm must pay the cheque into the client bank account. explain: The entire receipt is client money (SRA Accounts Rules, Rule 2.1) and must be paid promptly into the client bank account (Rule 2.3).
A solicitor is advising a trustee on the validity of certain dispositions in a will. One clause reads: "£5000 to be shared amongst such of my golfing buddies in such shares as my trustees shall decide" View less Is this a valid declaration of trust?
No, because the term 'golfing buddies' lacks conceptual certainty. The trust is a discretionary trust and the class of potential objects must comply with the given postulant test which requires conceptual certainty. The term 'buddies' has no settled/defined meaning.
A man leaves £250,000 'to my Trustee on trust to build a library for use by the employees of my company'. Is this a valid charitable purpose trust?
No, because the trust does not have a sufficient public benefit. explain: as the trust would be for the advancement of education (as it is for the purpose of building a library), but the people who would benefit from this particular purpose are linked by a common employer, so the personal nexus test will apply. This means that there will not be sufficient public benefit for the trust to qualify as a charitable purpose trust.
12 months ago, a trustee withdrew £10,000 in cash from the trust account and bought an electric bike for £3,000, which she handed to her son on his 18th birthday. He still has the bike which he relies on to get him to and from work. She spent the balance at an auction on a painting, now valued at £14,000. The trustee has recently been declared bankrupt. View less Which of the following is the best advice to give the beneficiary as to the type of claims to make and against whom such claims should be brought?
She should bring a proprietary claim against the trustee for breach of trust and fiduciary duty for the painting representing a clean substitution. A personal claim against the son is unlikely to succeed, but a proprietary claim is viable. There is no point in the beneficiary bringing a personal claim against the trustee, who is bankrupt (and therefore is unlikely to be able to meet any judgment awarded against her). The beneficiary, however, can bring a proprietary claim to recover the painting as this represents trust property having been cleanly substituted for trust money wrongly appropriated.
A personal representative (PR) asks for advice on who is entitled to a valuable painting which had belonged to the testator. The painting was on loan to a local art gallery at the time of the testator's death. Two months prior to the testator's death he had written to the PR saying that when the painting was returned by the gallery he intended that the PR would hold the painting on trust for the testator's grandson. The testator's will leaves his entire estate to a local charity. View less Which of the following best describes who is entitled to the painting?
The charity is entitled to the painting as it was still owned by the testator at the time of his death and therefore formed part of his estate. explain: In order to validly constitute a trust of a chattel such as a painting there must either be physical delivery to the trustee or a deed. The painting was never handed to the PR. A letter is not a deed. The transfer of legal title was therefore imperfect. The purported trust is not saved by any of the exceptions to the maxim that 'equity will not assist a volunteer'. The 'every effort' test does not apply as there had been no delivery/deed. The rule in Strong v Bird does not apply as the intention to make a gift was a future intention (ie when the loan ends). Ownership of the painting therefore remained with the testator and it formed part of his estate on death.
A woman makes a valid will containing the following gifts: "My car" to her next-door neighbour. "My company shares" to her brother. "My jewellery" to a colleague from work. "My residuary estate" to her husband. After making her will and before her death the following events occur: She sells her car and buys a replacement. Her brother dies. He is survived by a daughter (the woman's niece). All her jewellery is stolen and she uses the insurance money to buy replacements. She divorces her husband. The woman predeceases her father. View less Which of the following best describes who gets what property on the woman's death?
The colleague from work will get the replacement jewellery, because this gift was of property capable of increase or decrease. Explain: The colleague from work will get the replacement jewellery, because this gift was of property capable of increase or decrease.
A woman made a valid simple will seven years ago leaving a legacy of £10,000 to her godchild and everything else to 'my wife'. Since then the following events have occurred: Six years ago, her first wife died Four years ago, she married her current wife Three years ago, she executed a valid codicil to the will, in which she referred to the original will, added a legacy of £5,000 to her sister but made no other changes Two years ago, she drew a thin line through the legacy of £10,000 to her godchild and wrote £25,000 and signed her initials just above the original gift. View less Which of the following best explains the position as to who will inherit under the woman's will?
The current wife will receive all the woman's assets apart from £15,000. explain: although the woman's marriage four years ago revoked the original will, a codicil can revive a will, if it clearly refers to the will and demonstrates an intention to revive it (s.22 Wills Act 1837). This may well be the case here. The will and codicil then speak from the date of the codicil, so 'my wife' means the wife at the date of the codicil (s.34 Wills Act 1837). The will therefore leaves £10,000 to the godchild, £5,000 to the sister and everything else to the wife at the time of the codicil. The amendment to the will is made after execution of the codicil/republication of the will. The amendment has not been executed like a will and so cannot be valid (s.21 Wills Act 1837). As the original wording is apparent and clearly visible, the original gift of £10,000 to the godchild is still effective (as well as the new gift of £5,000 for the sister).
A man owned a number of shares in a private limited company which he had set up many years ago. He transferred some of his shares to his daughter five years ago by executing a stock transfer form and sent this along with his share certificate to the company. His daughter was duly registered as the new owner of those shares and the man retained the remaining shares. There was no apparent explanation at the time as to why the man did this but the daughter did start working in the company on a part time basis. Two years ago, he made a valid will leaving all his shares in the company (including those gifted to his daughter previously) to his godson. At the time he made the will, he indicated to the godson that he never meant to transfer the shares to his daughter and that it was a temporary arrangement. The man died last month and the godson is claiming all the shares. View less Which of the following statements best de
The daughter will be entitled to the shares because the law will rebuttably presume that a gift was made; neither the father's will nor the conversation with his godson are sufficient to rebut that presumption. explain: In the absence of any clear stated intention, the law will presume that a gift was made to the daughter (presumption of advancement). Whilst it is possible for the godson to rebut this presumption, any evidence adduced of contrary intention must have been at the time of, or so shortly afterwards so as to form part of, the transaction. The will and the conversation (indicating that the man still saw himself as owner of the shares) were made two years later, so will be insufficient to rebut the presumption of a gift; the daughter will be entitled to the shares.
A solicitor has issued a bill to a client for legal services. The bill includes an item for its professional charges and VAT on those charges. Which statement most accurately describes the correct position in relation to accounting entries for professional charges?
The debit entries on the client ledger account must be made in the business section. he purpose of the debit entries appearing on the client ledger are to show that clients of the firm owe money to the firm.
A man dies without leaving a valid will. He never married, formed a civil partnership or had children. His parents are both dead but he is survived by the following brothers and sisters: His elder sister, aged 25 His elder brother, aged 23. However, this brother died two weeks after the man in a car crash His younger brother, aged 20. His younger brother was married. Unfortunately, this brother died two months after the man due to a terminal illness. His wife (the man's sister-in-law) is still alive His younger sister, aged 16. His younger sister died three months after the man, leaving behind her young son (the man's nephew). The man's estate is now ready for distribution. View less Who has a share in the man's estate?
The elder sister, the estates of the elder brother and younger brother and the man's nephew. There being no will, the man has died intestate. As there is no surviving spouse, civil partner, issue or parents, the residuary estate is divided between the intestate's brothers and sisters of the whole blood on statutory trusts. This means that the: Elder sister Estate of the elder brother Estate of the younger brother and The man's nephew (as the surviving issue of the man's younger sister) take in equal shares. The nephew's share will be contingent upon him reaching the age of 18. note: The statutory trusts benefit siblings, not the spouses of siblings. Note in particular that the younger sister would have had a contingent interest in the residuary estate upon her reaching the age of 18. Even though she died without having attained a vested interest, her share is treated as being held on statutory trust for her son, the man's nephew (s 47 Administration of Estates Act 1925).
A testator signed his will with two witnesses present. The first witness signed in the presence of the testator but not in the presence of the second witness. The second witness signed in the presence of the first witness but not in the presence of the testator. The second witness then acknowledged his signature in the presence of the testator. The will contains an attestation clause. The person appointed as executor in the will was present throughout the execution process. The testator has now died. View less Which of the following best describes the ability of the executor to obtain a grant of probate of the will?
The executor is able to obtain a grant of probate because the will was validly executed and raises a presumption of due execution. explain: The will was validly executed in accordance with s9 Wills Act 1837. The testator signed in the presence of two witnesses as required. The first witness signed in the presence of the testator and the second witness acknowledged his signature in the presence of the testator. The witnesses do not have to sign in each other's presence. The attestation clause (assuming that it is worded to confirm compliance with s9) raises a presumption that the will was validly executed.
A man dies leaving a will which contains no express administration provisions. His will leaves a house worth approximately £500,000 and paintings worth approximately £2,000 to his son, a pecuniary legacy of £5,000 to his nephew, and the residue on trust in equal shares for his three grandchildren (all of whom are minors at the date of death). The estate includes the house and paintings and also bank accounts of approximately £40,000, a car worth approximately £3,000 and antiques worth approximately £5,000. Prior to distribution of the estate, the nephew asks the executors if he can have the car as part of the legacy bequeathed to him. View less Which of the following best states the action the executors can take?
The executors have authority to let the nephew take the car, with his consent. explain: Under s41 Administration of Estates Act 1925 (which has not been excluded or revised on the facts) where a will provides for a pecuniary legacy to a beneficiary, the executors may allow that beneficiary to take chattels or other assets in the estate up to the value of the legacy, provided these assets have not been specifically bequeathed by the will. The car has not been specifically bequeathed and as the request for the appropriation has come from the nephew, he is consenting.
A woman dies leaving a valid will which gives her entire estate to a named charity. Her executor establishes that the woman had the following assets: A house owned in her sole name; A half share in a flat owned by the woman and her daughter as tenants in common. The flat is currently rented out to produce a rental income; A share in a joint bank account, held by the woman and her daughter as joint tenants; A bank account in her sole name; A pension scheme of which the woman was a member. This scheme, run by her employer, pays out a lump sum following her death, and the trustees of the scheme have decided to pay the sum to the woman's daughter; A life assurance policy, the benefit of which was assigned to the woman's daughter 10 years ago; and An interest in a trust set up by the woman's father in his will, giving her the income from the residue of his estate for life, with the remainder passing to his grandchil
The house, the half share of the flat and the sole bank account. The house and the bank account are in the woman's sole name and can pass under her will. The flat is owned as tenants in common and so the half share will also pass to the charity under the terms of her will. The other property passes outside the terms of her will.
It is October 2022. A woman died in March 2022 leaving her entire estate to an animal charity. The man she had been living with as her husband since June 2020 feels aggrieved because he has been left out from her will. He wishes to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (the Act) and to apply for a benefit from the estate. The grant of representation was issued in May 2022. View less Which of the following statements best explains whether the man can make a claim under the Act?
The man cannot make a claim because he had not been living with the deceased for a whole period of two years ending immediately before death. explain: This is because the man and woman need to have lived as husband and wife in the same household for a whole period of two years ending immediately before death.
A man is named as one of two executors in the valid will of a woman. The woman dies, survived by both executors. One week after the woman's death, the man talks to his sister, who is a solicitor. He asks her to explain the role of an executor to him, as he is not sure he wants the responsibility. A week later he visits the woman's house and collects a painting and a few ornaments which he later sells. View less Which of the following best explains the man's position as to being an executor?
The man may not be able to renounce his right to take the grant. explain: It is not possible to renounce the right to take the grant if the executor has intermeddled in the estate. Intermeddling includes doing any acts that an executor could do, such as selling the testator's chattels. an executor cannot renounce if he has intermeddled in the estate, which seems to be the case on the facts.
In his will made two years ago, a man gives his residuary estate to his wife and appoints his neighbour as his executor. The man died six weeks ago owning assets in his sole name totalling £700,000. His wife has just discovered that the will is not validly executed. The man had no other family. Who will administer the man's estate?
The man's wife will administer his estate. explain: The man died intestate, and so the executor appointment of the neighbour is not valid. The whole estate will pass to the wife (as there are no children and she has survived 28 days) and so she will be entitled to administer it alone. although the man died intestate, there are rules to allow for the appointment of an administrator and so the estate will be administered. the will is not valid and so the neighbour has not been appointed as an executor under it. the usual need for two administrators only arises if there is a minority interest, and the surviving wife will be entitled to the whole estate on intestacy. In any event the neighbour has no entitlement to the grant under the rules. why is this stament wrong?The Treasury Solicitor will administer his estate. because--> the wife is entitled to the estate and so this is not an estate where no one has a beneficial interest.
A settlor created a contingent trust for his three grandchildren, who have yet to satisfy the contingency. The settlor appointed his sister and his financial adviser as the trustees. There is no express provision in the declaration of trust that deals with the appointment of trustees. The trust assets comprise company shares and some cash. The financial adviser trustee died 18 months ago. The other trustee, a retired nurse, relied on the financial adviser's expertise in the management of the investments. She is now worried by the responsibility of trusteeship, especially as the beneficiaries have complained that the value of the trust fund has deteriorated. View less Which of the following best describes how a new trustee can be appointed to assist the retired nurse in managing the trust's investments?
The retired nurse has the power to appoint a new trustee, but doing so by deed would not give the new trustee control over the trust investments. explain: The retired nurse as remaining trustee does have the power to appoint a new trustee, but using a deed to do so will not automatically vest title to the company shares, which comprise the trust assets, in the new trustee; separate stock transfer forms would need to be completed in addition.
In his valid will, a man makes a gift of his company shares to his son, contingent on reaching the age of 25, and the residue of the estate to charity. The man has died, still owning the shares and survived by his son, who is aged 18. The executor has recently obtained the grant of probate to the estate. Which of the following best explains what will happen to these shares?
The shares will be held on trust for the son until the age of 25. explain: At the date of the man's death, his son is aged 18 and has a contingent interest in the company shares until reaching the age of 25. Therefore, the company shares will be held on trust for him until the age of 25.
A man has recently died. His valid will left his house to his son and the residue of his estate to his daughter. The house is subject to a mortgage. Due to its size inheritance tax (IHT) will be payable on the value of the estate. The will is silent as to which part of the estate will bear the burden of paying the mortgage debt and as to which part of the estate will bear the burden of IHT attributable to the house. View less Where do the burdens of paying the mortgage debt and the IHT on the house lie?
The son will bear the burden of paying the mortgage debt but the IHT attributable to the house will be paid out of the residuary estate. explain: under s.35 Administration of Estates Act 1925 (AEA 1925) the default position is that the mortgage debt falls on the beneficiary who receives the charged property unless the will contains a contrary direction. Under s.34(3) AEA 1925 the default position is that the IHT on individual legacies is paid out of the residuary estate unless the will contains a contrary direction. The will does not contain any such contrary directions.
A trust is settled by a settlor. The settlor appoints a trustee but the trust deed does not provide for any remuneration or other financial benefit for the trustee's work in administering the trust. The trustee, in good faith, invests half of the trust property in her employer's business. As a thank you, the employer pays the trustee £100. The investment doubles the value of the trust property. View less What should the trustee do with the £100?
The trustee must account to the trust for the £100 because it is an unauthorised commission. the trustee has breached her fiduciary duty not to put her interests in conflict with those of the trust. The £100 is a prohibited commission payment. The trust deed does not permit her to receive this kind of payment. She must therefore account to the trust. The trustee could keep the £100 if the trust deed permitted a payment of this kind. As the trust deed is silent on the trustee's remuneration, the trustee may not keep the commission payment.
A trustee is managing a trust fund worth £200,000. The trust deed provides that the trustee shall not invest in companies which practice animal testing because the settlor considers this to be unethical. The trustee is considering whether to invest the whole trust fund in a company which does not conduct animal testing. This investment would produce lower returns than an investment in a company which does conduct animal testing. View less Which of the following best describes the trustee's duties on investment?
The trustee should not invest the whole trust fund in the company which does not conduct animal testing because this breaches the need for diversification. Whilst it is an express term of the trust that the trustee shall not invest in companies which practise animal testing, s4 Trustee Act 2000 provides that trustees must take into account the standard investment criteria when investing the trust fund, including the need for diversification. Investing the whole of the fund in the company which does not practise animal testing complies with the settlor's express term regarding ethical investment, but breaches s4 TA 2000.
Two trustees of a family trust fund of £10,000,000, decided, after obtaining investment advice, to invest £1,000,000 purchasing 80% of the shares in a company developing land at an expensive seaside resort. The sole beneficiaries, a man and his adult daughter aged 35, had also written urging the trustees to make this investment because the managing director of the company had recently become engaged to marry the man and both beneficiaries were keen to support the project, confident the venture would be successful. In the two years since making the investment, the trustees took no steps to monitor the company by securing representation on the Board of directors. Two months ago, the entire development collapsed into the sea following a severe storm. The development company is now insolvent. View less Which of the following statements best describes the liability of the trustees?
The trustees are not personally liable for the loss caused to the trust. Whilst they have breached duties in failing to review, supervise and monitor the company, the loss was not caused by their breaches of duty and therefore there is no need to rely upon any defence. explain: Having invested trust funds significantly in the company, the trustees should have taken prudent steps to safeguard that investment, such as by securing representation on the board of directors. Their failure to do so is arguably a breach of trust.
A man recently died leaving a valid will containing the following provisions: "My Trustees shall hold the Trust Fund for my wife for life and thereafter for such of my children as shall attain the age of 21 and if more than one in equal shares." The Trust Fund is valued at £200,000. There are no relevant administrative provisions in the will. The man is survived by his wife, a son now aged 18 years and a daughter now aged 21 years. The daughter has recently asked the trustees to advance £15,000 to her from the trust to pay for her university fees and expenses for her final year at university. View less Which of the following statements best describes how the trustees should respond to this request?
The trustees have a discretion as to whether to pay the money but the wife must consent in writing to the request. s32 Trustee Act 1925 (TA 1925) allows trustees to advance capital early to a beneficiary with an interest in capital for the beneficiary's advancement or benefit provided certain conditions are satisfied. One such condition is the requirement to seek the written consent of anyone with a prior interest. The wife must therefore consent. The power of advancement is always exercisable at the discretion of the trustees and so the daughter cannot insist upon the early release of capital.
A woman has been living with her partner in a property which is in her partner's sole name. Her partner bought the property eight years ago, using his savings of £50,000 and a mortgage of £300,000. The woman paid for the stamp duty land tax and legal costs. For the past eight years, her partner has been responsible for the mortgage payments, although the woman did pay the mortgage for a period of 11 months whilst her partner was out of work. The woman also paid for a new kitchen and bathroom shortly after her partner purchased the property. The woman and her partner have now separated. They had no written agreement relating to ownership of the property. View less Will the woman be able to claim a share of the property?
Yes, because common intention can be inferred from her payment of the mortgage instalments. explain: In order to establish a common intention constructive trust, a claimant must establish common intention (express or inferred) and detrimental reliance. According to Lloyds Bank v Rosset, common intention can be inferred from a direct contribution to the purchase price, or a significant contribution to mortgage payments. Here, the woman has paid the mortgage for a period of 11 months so, as long as the court considers that this constitutes a significant enough contribution to the mortgage, then a common intention constructive trust will have arisen. The payments will also satisfy the requirement for detrimental reliance.
A man died in September 2021 owning the following assets in his sole name: A house worth £525,000 Quoted shares (all small percentage holdings in various companies) together worth £420,000 Bank accounts together worth £80,000 There were no debts. The man never married. In his valid will, he left his entire estate to his sister. Two years before he died, the man gave £36,000 to his sister to help her with some medical expenses, but made no other lifetime gifts. Assumptions: The nil rate band is £325,000 The residence nil rate band is £175,000 The annual exemption for lifetime transfer is £3,000 View less Which of the following is the correct amount of inheritance tax payable on the man's estate?
£292,000 All of the items listed (the house, quoted shares and bank accounts) are property that fall within the man's estate for IHT purposes. These items are valued together at £1,025,000. We are told that there are no debts to be deducted from that valuation. There are no relevant exemptions to be applied at this stage of the calculation. We would then usually apply the nil rate band (NRB). However, in this case, the man has made a lifetime transfer (a PET or potentially exempt transfer) of £36,000 to his sister. This transfer will become chargeable as the man died within seven years of making the transfer. The value of the transfer can be reduced by applying the annual exemption (there being no other exemptions or tapering that would apply in this case). However, note that any unused annual exemption may be carried forward for one year, so in this case a maximum exemption of £6,000 will be available. This reduces the value of the transfer to £30,000. We then apply the lifetime transfer against the NRB. This reduces the value of the NRB available for the estate to £295,000. The amount of the estate that exceeds the reduced NRB is £730,000 to which we apply the usual rate of IHT of 40% giving us an IHT bill of £292,000.
A woman died recently without having made a will. The woman had never been married, nor entered into a civil partnership. She made no lifetime gifts and had no debts. At the time of death the woman owned her home (valued at £500,000). In addition to her home, the woman had jewellery worth £125,000, a life insurance policy payable to the estate (which had a maturity value of £100,000 on death) and £250,000 worth of shares in Green Ltd, a family company that manufactures ski equipment. The woman had owned the shares for the past 20 years. The woman is survived by her 2 sons (aged 45 and 42). She had no other relatives. In the tax year of death the nil rate band is £325,000 and the residence nil rate band is £175,000. View less Which of the following states the correct amount of IHT payable on the estate?
£90,000. explain: The estate consists of the house (£500,000) + life insurance policy (£100,000) + jewellery (£125,000) + shares in private limited company (£250,000) = £975,000. Business property relief applies to the shares (unquoted, trading company and owned for 2 years), leaving a taxable estate of £725,000. The residence is closely inherited by the 2 sons and therefore residence nil rate band will be available - so the first £175,000 is taxed at 0%. The full nil rate band of £325,000 will also be available as the woman made no lifetime gifts, leaving £225,000 x 40% = £90,000 tax.
