Get premium membership and access revision papers, questions with answers as well as video lessons.

Bac 411: Trust And Executorship Question Paper

Bac 411: Trust And Executorship

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 411: TRUST AND EXECUTORSHIP
DATE: THURSDAY, 13TH AUGUST 2009

TIME: 2.00 P.M. - 4.00 P.M.

INSTRUCTIONS:

The paper has FOUR questions.
Answer all the questions.

QUESTION ONE
Simba (aged 56) died in a road accident on 31 December 2003. On 1 May 2004 after his
executors had paid all his debts, (except for the mortgage on his freehold house referred to below)
testamentary funeral expenses, his estate was ascertained as follows:

Shs ‘000
Shs ‘000
Cash on bank accounts

17,000
Freehold house

13,000
Jaguar motor car

1,440
Mercedes motor car

2,520
Stamp collection

1,700
Debt due from William

240
Furniture and other personal effects

2,690
10,000 Ordinary Shs.20 shares in Kenya Breweries Ltd
2,400
4,500 Ordinary Shs20 shares in Nation Printers Limited
1,480
Shs800,000 5% Kenya Stock

470
Income received to date:

Dividend from Nation Printers Ltd.
460

Bank interest
74

534

Less: Mortgage interest paid 31 March 2004
240 294
Page 1 of 5

Extracts from Simba’s will left bequests as follows:
a)
To my wife Jane, I leave my furniture and other personal effects and the residue of my

estate, after payment of my debts and expenses.
b)
To each of my sons, David, Jack and Stuart, Shs2m.
c)
To my unmarried daughter, Clare, my freehold house subject to any mortgage thereon.

The house was subject to mortgage of Shs4m carrying interest at 12% per annum payable

31 March and 30 September.
d)
To my friend Tony, whichever of the motor cars owned by me at the time of my death he
may
choose.
e)
To my good friend Gerry, Gangla Shs200,000
f)
To my friend Ben, some of my furniture.
g)
To my cousin Susan, my painting of the “Street Scene” by Renoir.
h)
To my friend Dennis, Shs400,000 on condition he gives up the bad habit of smoking.
i)
To my brother Joseph, 1,000 shares in Brooke Bond (K) Ltd.
j)
To my sister Elsie, Shs1,200,000.
k)
To my secretary Betty, half of my holdings or ordinary Shs20 shares in Kenya
Breweries
Ltd.
l)
To my cousin Miriam, my holding of Shs800,000 5 1 % Kenya Stock and my holding of
2

shares in Cassava Ltd.
m)
To my chauffeur, Malcom Shs1,200,000
n)
To my gardener Jeremiah, Shs600,000 if still in employ at the death of my death.
o)
To my friend Eric, my 6,000 ordinary shares in Printers Ltd.
p)
To my nephew Frank, 4,000 ordinary Shs20 shares from my holding of such shares in

Kenya Breweries Ltd.
q)
To my nephew Tracey, Shs400,000 payable out of my holding of Shs10 ordinary shares in

Kenya Breweries Ltd.
r)
To my friend Timothy, Shs300,000.
s)
To my cousin Hazel, the Shs240,000 which William owes me.
t)
To St. Peters Church Shs200,000 to provide a stained glass window in memory of my
mother.
u)
To my good friend Gangla Shs300,000 for looking after my house for many years when I

went on holiday.

Page 2 of 5

Simba executors ascertained that the following beneficiaries were dead:
- Son Jack, died 1989, leaving a wife and two children.
- Son, Stuart, died 1988, leaving a wife.
- Sister Elsie, died 20x6, leaving a husband and two daughters.
- Chauffeur Malcolm (aged 60) killed in the same accident as Simba. It was impossible to
determine the order in which Simba and Malcolm died.

The executors also advice you that
a)
Tony elected to have the Mercedes car.
b)
Simba sold the Renoir painting in 1987 for Shs6m.
c)
Dennis replied in a letter to the executors that he had no intention of giving up smoking.
d)
Simba owned no shares in Brooke Bond Ltd. The value of 1,000 shares in that company
is
Shs660,000.
e)
There is no such investment as 5 1 % Kenya Stock. There reference in Robin’s will to
2

5 1 % is thought to be a typing error not previously noticed.
2
f)
Robin sold his shares in Cassava Ltd. using the proceeds of Shs1,800,000 to purchase his

shareholding in Kenya Breweries Ltd.
g)
The gardener Jeremiah retired in June 2003.
h)
In early 1990, Printer Ltd, merged with Nation Ltd. to form a new company Nation

Printers Ltd and Simba received 4,500 new ordinary shares in Nation Printers Ltd. in

exchange for his 6,000 ordinary shares in Printers Ltd.
i)
Timothy replied in a letter that he didn’t want anything from msitu’s estate because

actually he hated the sight of him.
j)
In 1989 Simba had paid Shs250,000 for a stained glass window in St. Peter’s Church in

memory of his mother.
k)
His daughter Clare had married in April 1989.
l)
Gerry Gangla claimed both legacies.

Required:
a)
A statement showing the distribution of Simba’s estate on 1 May 2004.
(20 marks)
b)
A list of legacies to which the executors should not assent, briefly explaining

the reason why the legacy is invalidated.

(10 marks)

(Total: 20 marks)
Page 3 of 5

Question two

Kaluko, a widower died on 28th February 2007 and by his will executed ten years earlier made the
following bequests:

To my brother George, my record collection.
To my brother David, on his wedding day, Sh50,000.
To my dearest sister-in-law, my furniture and personal chattels, not otherwise bequeathed.
To my nephew Peter, a mini-metro motor car.
To my niece Sandra, Sh200,000 payable out of my account with Lukenya Building Society.
To my nephew Timothy Sh100,000 in my deposit account at Trust Bank.
To the All Saints Cathedral Sh100,000 for the refurbishment of the choir stalls.
To each of my sons Edward and Francis Sh1.5 million.
To the residue of my estate on trust to provide an annual income for my daughters Barbara, until
they marry and thereafter to my grand children in equal proportions.

You ascertained the following:
a)
George and Edward both predeceased Kaluko. Each had two children living at the time of
Kaluko’s
death.
b)
David is a confirmed bachelor. He declares that “having failed to get him married while

alive, Kaluko will not bribe into getting married now he is dead.
c)
Kaluko had three sisters-in-law, all of whom he visited regularly.
d)
At the date of the will Kaluko had three sisters-in-law, all of whom he saw regularly prior

to his death.
e)
At the date of the will Kaluko owned a Datsun car, two years ago he replaced it with a

Toyota, he has never owned a mini metro car.
f)
The Lukenya Building Society account had been closed on 30th September 20X3.
g) On
28th February 20X4 there was only Sh72,000 in the deposit account at Trust Bank.
h)
Kakuzi Ltd. had converted each of its Sh20 ordinary shares into 4 units of Sh5 each

ordinary stock in October 20X2. Kaluko owned 4,000 units of Kakuzi ordinary stock at

the date of his death.
i)
The choir stalls at All Saints Cathedral had been refurbished fully the previous period at

which time Kaluko had contributed Sh120,000 to the refurbishment fund.
j)
Both Kaluko’s daughters had married prior to his death and Andrew had a total of five

grand children alive at 29th February 20X4, the eldest of whom was eight years.
Page 4 of 5

k)
In addition to the assets specifically referred to above, Kaluko’s estate also included a

freehold house together with cash and investments totaling Sh7 million after payments of

debts and funeral expenses.

Required

In relation to each bequest in Kaluko’s will, state the type of legacy referred to and explain
whether or not the executors should give assent to the gift.

(Total 20 marks)

(Total 20 marks)

QUESTION THREE

Explain what you understand by the term implied trust.

(5 marks)
Explain the three most important conditions or certainties for a trust.

(5 marks)

(Total 10 marks)

QUESTION FOUR

Explain the investment policy according to the trustee act cap 167.

(10 marks)

(Total 10 marks)

*******************
Page 5 of 5

Bac 411: Trust And Executorship Question Paper

More Question Papers

Popular Exams