CLS 418 Evening.pdf - The Catholic University of Eastern Africa Library

CLS 418 Evening.pdf - The Catholic University of Eastern Africa Library

THE CATHOLIC UNIVERSITY OF EASTERN AFRICA A. M. E. C. E. A P.O. Box 62157 00200 Nairobi - KENYA Telephone: 891601-6 Fax: 254-20-891084 E-mail:academi...

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THE CATHOLIC UNIVERSITY OF EASTERN AFRICA A. M. E. C. E. A

P.O. Box 62157 00200 Nairobi - KENYA Telephone: 891601-6 Fax: 254-20-891084 E-mail:[email protected]

MAIN EXAMINATION JANUARY – APRIL 2015 TRIMESTER

FACULTY OF LAW EVENING PROGRAMME CLS 418: TRUST AND TRUST ACCOUNTS Date: April 2015

Duration: 2 Hours

INSTRUCTIONS: Answer Question ONE and ANY OTHER TWO Questions Q1.

a)

In the creation of trust three certainties are necessary. Explain what the THREE certainties are giving an example for each. (6 marks)

b)

Explain duties of a trustee as stipulated in Trust Act.

(8 marks)

c)

Describe two ways of constituting a trust.

(4 marks)

d)

Onyango died intestate leaving his two wives Atieno and Akinyi who he had married under system of law which permits polygamy. Anyango his second wife had predeceased him leaving two children, Soswa and Sopra who are still alive. Atieno has three surving children, Pamela, Pamula and Obama while Akinyi has no children. Onyang’s estate consists of:

Personal effects Household effects Motor Vehicle Residue

Sh. 400,000 1,000,000 500,000 3,000,000

Required: Prepare a statement sharing how Onyango’s estate will be distributed (12 marks) CUEA/ACD/EXM/JANUARY – APRIL 2015/LAW

ISO 9001:2008 Certified by the Kenya Bureau of Standards

Page 1

Q2.

Q3.

a)

Differentiate between the following types of trusts i)

Fully secretive trusts and half secretive trusts

(4 marks)

ii)

Discretionary trust and Protective trusts

(4 marks)

iii)

Implied trusts and constructive trusts

(4 marks)

b)

Explain FOUR ways in which a trust may be terminated.

(8 marks)

a)

Mkubwa died on 1st January 2014 and by his will he left his house to his wife for her life and on her death, to his eldest son Tom absolutely. He left the residue of his estate to be held on trust for the benefits of his wife for their life and on her death to be shared amongst her other children, Njeri, Wanjiru, Wambui, Kamau, and Mwaura. His will gave no direction as to the investment of his trust funds. On 1st January 2014, his house was valued at Sh1,300,000. He had 10,000 shares in KBL Ltd valued at Sh50 each, Sh500,000 nominal 12% Kenya Government stock valued at Sh91 and Sh 250,000 in the bank. His debts and funeral expenses amounted to Sh 30,000. On 1st July 2014, KBL shares were quoted at Sh49 and the 12% Kenya government stock was quoted at Sh90. Required:

b)

i)

Prepare the Estate Capital Account

(6 marks)

ii)

The trust statement of financial position

(6 marks)

Explain FOUR reasons that may lead to failure of testamentary gifts. (8 marks)

CUEA/ACD/EXM/JANUARY – APRIL 2015/LAW

ISO 9001:2008 Certified by the Kenya Bureau of Standards

Page 2

Q4.

a)

Explain FOUR fundamental requirements of a valid oral will.

b)

Mzee Majivuno aged 61 years died in Westgate terror attack on 31 st December 2013. On 1st May 2014 after his executors had paid all the debts and funeral expenses his estate was as follows:

Bank account Freehold house Toyota NZE Honda civic Television and Music system Furniture and personal effects 8,000 ordinary shares in Safaricom Ltd 4,000 ordinary shares – Barclays Bank Interest Dividend from Barclays Bank

(8 marks)

Sh.’000 2,250 4,150 450 320 230 280 1,600 320 200 240 9,840

Extracts from Mzee Majivuno will left bequests as follows: i) ii) iii) iv) v) vi) vii) viii)

ix)

To each my sons; John, Juma, July Sh500,000 To my wife Kachungwa I leave my furniture, household and personal effects and residue of my estate To my daughter Khadija my freehold house subject to a mortgage of Sh 1,200,000. Duty on house amounts to Sh140,000. To my friend Kimbo 4,000 ordinary shares from my holding of such shares in Safaricom Ltd. To my nephew Kazungu 1,500 shares in Barclays Bank To my driver Tumbo Sh200,000 To my neighbor Jirani, Sh60,000 The executors ascertain the following were dead; Son Juma died in 2010, Driver aged 65 years died in the same terror attack Jirani replied in writing that he did not want anything from Mzee Majivuno because he was a bad neighbor.

Required: Assessment showing the distribution of Mzee Majivuno’s estate.

(12 marks)

*END* CUEA/ACD/EXM/JANUARY – APRIL 2015/LAW

ISO 9001:2008 Certified by the Kenya Bureau of Standards

Page 3