Discuss the different types of trusts, and the reasons why one may wish to create such a trust. Provide examples.
The answer to this question should:
Define a trust
Describe intervivos trusts, mortis causa trusts, private trusts, public trusts, and charitable trusts .
Students should describe the different reasons to create a trust including
o To administer the estate of a deceased person
o To protect the vulnerable – eg for maintenance payments for person with learning disability
o (Improper) liferents (asset owned by trust but used by beneficiary – eg a house –spouse lives there but child inherits house)
o Bankruptcy – trustee in sequestration administers assets of bankrupt person in interests of creditors
o In finance – as a vehicle for holding property separate – eg unit trusts, investment trusts, pension funds
o In tax planning – assets put into trust in countries where tax rates are low
o Charitable purposes – most charities operate through the use of trusts.
o To protect from the truster’s insolvency – laws may limit this
o Employee share schemes
Examples of trusts should be provided from the cases discussed in the unit such as Rae v Meek (1889) 16R (HL) 31 Students should remember to provide proper citations of cases and legislation, and that points are awarded for clear, logical and coherent writing.