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IAI Actuarial Core Principles · Business Management · Trusts and agency

Mrs Latha Menon transfers Rs 50 lakh to Mr Vikram Shah, 'to be held on trust for the benefit of such of the employees of Menon Actuarial Services as Vikram selects, and the balance, if any, I want applied to some worthwhile cause'. Later, a creditor challenges the arrangement. Which analysis is most consistent with the requirements for a valid trust?

The employee gift may be valid because the class is identifiable even though the trustee has discretion, but the balance for 'some worthwhile cause' is likely to fail for uncertainty of objects. Vague purposes that are not clearly charitable cannot be enforced by a court.

  1. AThe whole trust is valid because the transfer of money satisfies every requirement
  2. BThe whole trust is void because a trust may never give the trustee any discretion
  3. CThe gift to the employees may be capable of being valid if the class is certain, but the gift of the balance to 'some worthwhile cause' is likely to fail for uncertainty of objectsCorrect
  4. DThe trust is valid in full because a vague cause is always treated as charitable
  5. The trust is void because the settlor and the trustee are different persons

Explanation

Discretionary trusts can be valid where the class of potential beneficiaries is conceptually certain, so employees of a named firm may qualify. 'Some worthwhile cause' is too vague to be a defined purpose or class, and is not necessarily charitable, so that part is likely to fail. Transfer of property satisfies constitution but not certainty of objects.

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