Please enable JavaScript.
Coggle requires JavaScript to display documents.
Identification of beneficiaries (Blind Trusts (A settlor transfers assets…
Identification of beneficiaries
With a fixed trust it must be possible to list all the beneficiaries exactly, otherwise the trust will be void
With discretionary trusts, a different test is applicable. In IRC v Broadway Cottages Trusts (1955) the trustees had power to apply the income for the benefit of all or any of a class of beneficiaries, specified in a schedule as the trustees in their absolute discretion thought fit. It was held that the trust was void because it was not possible to list all the possible beneficiaries.
However, in McPhail v Doulton (1971) the House of Lords overruled the decision of IRC v Broadway Cottages Trusts (1955).
The test for discretionary trusts is whether it I possible to say that a person comes within the class of beneficiaries, it is no longer essential to be able to list all possible beneficiaries
Blind Trusts
A settlor transfers assets to a third party who has complete discretion in how to use or invest the assets
The settlor is also the beneficiary, thus the trustee is managing the assets for the benefit of the settlor
Generally only used when a settlor wishes to keep the beneficiary unaware of the specific assets in the trust such as to avoid conflict of interest between the beneficiary or what they're being used for
The settlor / beneficiary can't give any instructions to the trustee about what to invest in, they have absolutely no knowledge of how the assets are invested or what they're being used for
There have been recent occasions when it has come to the attention of the media of politicians or others in sensitive positions often placing their personal assets into blind trusts to avoid public scrutiny and accusations of conflicts of interest when they direct government funds to the private sector
By placing the assets in a blind trust the politician can benefit from their assets without being responsible for how and when they increase in value
A blind trust is often used with those who have come across a fortune within a short period of time (eg inheritance or a lottery) in order to keep their identity anonymous to the public
Purpose trusts
Have no beneficiaries but instead exists for advancing a non-charitable purpose
These are trust structures which assist in tax, estate planning or company restructuring but in which no company, or individual has a beneficial interest
The terms of the deed must define the valid purpose to which the trust fund may be applied and the non charitable purposes must not be so uncertain that its performance is rendered impossible, contrary to public policy or immoral
Must be created in writing to avoid problems caused by incomplete oral gifts and an enforcer must be appointed to act. A positive duty will be enforced to compel trustees to appoint an enforcer if there is none in office
The enforcer is not capable of acting or alternatively is refusing to act the trustee must initiate action to have the enforcer replaced
If is the fiduciary duty of the enforcer to police the trustee and to enforce the stated purposes of the trust. A trustee cannot also serve as an enforcer of the same trust but the law does permit employees or associated companies of a trustee to serve as an enforcer
The class closing rule
Where a gift is made to members of a class, class closing rules (Andrews v Partington) may apply in order to determine when the membership of the class is to be ascertained if is not specifically provided for in the trust documentation