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IAI Actuarial Core Principles · Business Management · Trusts and agency

A trust deed for a company staff pension fund directs the trustees to pay each retiring employee a fixed pension according to a schedule in the deed, leaving the trustees no choice over who benefits or how much each receives. How is this trust best classified?

It is a fixed trust. The deed itself determines who benefits and how much each receives, leaving trustees only to administer the schedule. A discretionary trust would give trustees choice over beneficiaries or amounts, and resulting or constructive trusts arise by operation of law, not from an express schedule.

  1. AA fixed (specific) trust, because beneficiaries' entitlements are set by the deedCorrect
  2. BA discretionary trust, because trustees choose amounts
  3. CA resulting trust, because the property returns to the settlor
  4. DA constructive trust, because a court imposed it
  5. A secret trust, because the entitlements are undisclosed

Explanation

In a fixed trust the beneficiaries and their shares are determined by the instrument, and trustees merely carry out those terms. A discretionary trust would let trustees decide who benefits or how much. The trust here is express, written and not imposed by a court, so resulting, constructive and secret classifications fail.

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