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Question 1

The normal purpose of a trust is to:

a) Provide financial benefits for the beneficiaries

b) Protect beneficiaries from any financial loss

c) Preserve the trust property for as long as the trust lasts

d) To ensure that all the beneficiaries are satisfied with their share

Question 2

The major reform of the law in the Trustee Act 2000 is that:

a) Trustees now have a duty of care

b) Trustees may delegate certain functions to agents

c) Trustees are no longer restricted in the type of investments that they can make

d) Trustees must seek advice

Question 3

Diversification means:

a) Buying more than one type of share

b) Investing in land

c) Putting the trust fund into different types of investment

d) Investing all the trust fund

Question 4

Which new type of investment is allowed by the Trustee Act 2000?

a) Shares

b) Freehold and leasehold land in England and Wales

c) Mortgage loans

d) Debentures

Question 5

How can the terms of the Trustee Act 2000 be modified or excluded?

a) By express words in the trust instrument

b) If the trustees insist

c) By order of the court

d) With the agreement of all the beneficiaries

Question 6

Which of the following options is correct? Professional trustees:

a) Owe the same duty of care as lay (non-professional) trustees

b) Are protected from liability by exclusion clauses in the trust instrument

c) Owe a lower duty of care than lay (non-professional) trustees

d) Owe a duty of care determined by any special knowledge or experience that they have

Question 7

If a trustee is in breach of trust:

a) They must restore any lost assets to the trust estate

b) Compensate the beneficiaries for their loss

c) Pay damages for the loss caused by their breach of trust

d) Pay fair and reasonable compensation

Question 8

Trustees:

a) Are not permitted to make ethical investments

b) Are allowed to make any investments that they choose, including ethical investments

c) Must only pursue the best financial interests of the beneficiaries

d) Are allowed to make ethical investments as long as they are satisfied that this would not involve a risk of significant financial detriment

Question 9

Trustees may employ agents:

a) If to do so would be normal business practice

b) Whenever they want and for whatever task that they want

c) For any function except the distribution of trust assets

d) Only if authorised by the court

Question 10

Trustees are:

a) Liable for all acts and defaults of their agents

b) Liable for any acts or defaults of their agents that the trustees should have detected with reasonable care and skill

c) Not liable for any acts or defaults of their agents unless the trustees themselves are guilty of willful default

d) Not liable for any acts or defaults of their agents

Question 11

Which of the following is correct? Trusts:

a) Must explain all their decisions to their beneficiaries

b) Need only explain decisions that directly affect the beneficiaries' financial interests

c) Are not obliged to give any reasons for their decisions to the beneficiaries

d) Are not obliged to give any reasons for their decisions, but if they do give a reason, then the court can review the accuracy of their decision

Oxford University Press, Online Resource Centre, Chapter 04.

Chapter 04

Instructions