2. Beneficial Entitlement Flashcards
What is a fixed interest trust?
Name 4 types:
Settlor sets out entitlement for each beneficiary (or whole trust is for sole beneficiary)
Trustees have no discretion in relation to distribution.
Inlcludes.
1. Fixed interest for single beneficiary
2. Fixed interest for multiple beneficiaries with interest in possession
3. Successive interest trust
4. Life interest trust
What happens where there are multiple beneficiaries for a fixed trust but uncertainty with some identities?
Trust may not fail completely
If identifiable ones have entitlement not dependent on uncertain ones, they can take their interest
What is a power of appointment?
A right to choose who, from within a specified class of objects, receives property. Trustees have discretion as to whether to exercise power at all.
Not a trust, but may be included in trust.
If exercised, trustee have absolute discretion as to who benefits
Must satisfy is/is not test
What rights do objects under a fixed trust have?
Proprietary Rights:
- May be vested or contingent
- Capable of sale/transfer
- Can be asserted against 3rd parties
- Rule in S v V
Personal Rights:
- Right to compel administration;
- be informed of entitlement once interest vests;
- sue trustees for breach
What are the requirements for the Rule in Saunders v Vautier?
Beneficiaries must be
- over 18,
- of sound mind and
- all agree
For contingent, defeasible interests, and objects under discretionary trusts and successive interest trusts must all act together
What rights do objects under a discretionary trust have?
- right to obtain information about the trust
- Right to enforce the trustees’ proper exercise of their discretion (though cannot compel exercise in their favour)
- Seek return of misapplied trust property
- Rule in S v V
What interest do objects of a trust discretionary not have?
Don’t have an equitable interest in the property until discretion is exercised in their favour
What is the difference between ‘vested in possession’ and ‘vested in interest’? How can they be defeated?
In Possession = current right to current enjoyment
In Interest = current right to future enjoyment
Vested interests can be defeated by a condition subsequent
What limits are there on the rule in S v V?
- Cannot tell trustees how to perform their role
What is a discretionary trust?
The trustees of a discretionary trust do have a distributive discretion. Although the settlor determines the potential beneficiaries of the trust (known as the ‘objects’ of the trust).
The trustees must exercise their discretion and must do so within a reasonable time.
What are 3 ways to tell if it is a discretionary trust or a Power?
(a) Imperative wording such as ‘must’ suggests a discretionary trust whereas permissive wording such as ‘may’ suggests a power of appointment.
(b) If discretion has been given to a third party (not a trustee) it is a power of appointment, not a discretionary trust.
(c) The presence of a gift-over indicates a power of appointment (because it means the power does not need to be exercised) but lack of a gift-over is not determinative.
When can Saunders v Vautier be exercised for a multiple beneficiary fixed trust?
Where the interests are severable.
NOT for successive/ life interests generally.
Can objects under a power of appointment exercise S v V rights?
No!
