Session 3_DN

Robert, a wealthy individual, created a trust in his will. The trust deed states: "I direct that the trust property be held by my trustees upon discretionary trust for the benefit of such one or more of my friends who resided with me from overseas, in such shares and at such times as my trustees shall in their absolute discretion determine. My trustees shall have full discretion to decide which of the said friends shall benefit, the extent of their benefit, and whether any such benefit shall be provided at all.” Is the description of the trust objects certain?

• Yes, the trust objects are certain as it refers to Robert’s friends who resided with him from overseas

• No, the description of part of the trust objects as “my friends” is too vague

• No, the phrase “resided with me” used to define the objects is too vague

• No, both the words “my friends” and “resided with me” are too vague

Answer explanation

Lempens v Reid (2009) 2 ASTLR 373

Hildah drafted a discretionary trust specifically for “my nephews who reside in Australia." Is the class of beneficiaries sufficiently certain to satisfy the legal requirement of certainty of objects in trust law?

• Yes, the wording is clear in its description of objects as nephews residing in Australia

• No the phrase “residing in Australia” describing the objects is too vague

• No, the word “nephews” describing the objects is too vague

A $100,000 discretionary trust is set up for “all individuals who purchased a chocolate muffin at the MSLS Law Cafe on 2nd August this year.” The cafe reported $250 in muffin sales (at $5 each) that day, with 30% of sales in cash and 80% of customers not requesting receipts. Given these circumstances, what type of uncertainty could potentially affect identifying beneficiaries in this trust?

• Semantic uncertainty

• Evidential uncertainty

• Administrative uncertainty

A discretionary trust of $150,000 has been designated for “all the men and women who have given me pleasure over my long life”. Given these circumstances, what type of uncertainty could potentially affect identifying beneficiaries in this trust?

• Semantic uncertainty

• Evidential uncertainty

• Administrative uncertainty

A discretionary trust of $150,000 has been designated to “the inhabitants of Western Australia”. Given these circumstances, what type of uncertainty could potentially affect identifying beneficiaries in this trust?

• Semantic uncertainty

• Evidential uncertainty

• Administrative uncertainty

Consider the following clause from a testator’s will: ‘I leave my entire estate to my children, with my sister Alice having the authority to decide which child gets which asset.’ Based on this clause, determine the type of powers of appointment presented. Select the most appropriate option from the choices below:

• General power of appointment

• Special power of appointment

• Hybrid power of appointment

Consider the following clause from a testator’s will: ‘I grant to my brother Alan the power to distribute my collection of exotic wines as he sees fit.’ Based on this clause, determine the type of powers of appointment presented. Select the most appropriate option from the choices below:

• General power of appointment

• Special power of appointment

• Hybrid power of appointment

Consider the following clause from a testator’s will: ‘My husband Tom may use any income generated by the marital trust assets during his lifetime. When Tom dies, all of the marital trust assets shall be appointed to anyone except our children.’ Based on this clause, determine the type of powers of appointment presented. Select the most appropriate option from the choices below:

• General power of appointment

• Special power of appointment

• Hybrid power of appointment

Larry, has always been close to his aunt Betty, a full-time school teacher suffering from a chronic illness. Seeing her struggle with her health, Larry decides to set ups up a trust specifically ‘to cater for the treatment of aunty Betty’, as Larry puts it. He hopes that the trust will provide for her medical expenses and ensure she has the best care possible. Is this a valid charitable trust?

• Yes, because the trust is for a family member who is in need

• Yes, because the trust is intended to help with medical expenses

• No, because the trust doesn’t benefit the public or a significant portion of it

• No, because the trust does not cover a recognised charitable purpose

Peter, a philanthropist, admires the dedication of Australian military personnel deployed overseas and acknowledges the emotional impact on their families, particularly grandparents. He subsequently establishes a trust to financially ‘alleviate the daily burdens and pressing needs of the grandparents of Australian service men and women currently deployed overseas.' Is this a valid charitable trust?

• Yes, because the trust targets poverty alleviation

• Yes, because the trust benefits the public or a significant portion of it

• No, because the trust only targets a small section of the public

• No, because the trust doesn’t have a clear charitable purpose