3. Beneficial Entitlement Flashcards
DEF: Capital Gain
Underlying value of the thing you own has gone up over time
DEF: Income Return
Money (or equiv.) received on a regular basis, deriving from property
Beneficiary with interest in capital?
Absolute Interest
Beneficiary with interest in income only?
Limited Interest
DEF: Vested Interest
If beneficiary exists and does not have to satisfy any conditions before becoming entitled to trust property (interest = unconditional)
What happens if a beneficiary with a vested interest dies before the trust property is paid to them?
It will belong to their estate (and will pass according to their will or the intestacy rules)
What happens when a minor beneficiary reaches 18?
If no conditions in trust based on age, trustees can transfer the property and discharge themselves from the trust (age 18 = able to give good receipt)
- This occurs at beneficiaries request, until then it is a BARE TRUST
DEF: Contingent Interest
Interest is contingent on a future event that may or may not happen, or beneficiary does not exist
- once condition satisfied, interest becomes vested
What happens if a beneficiary with a contingent interest dies before they satisfy the conditions of the trust?
Their interest fails and therefore goes back to settlor unless settlor has provided that it should go to somewhere else
DEF: Remainderman
Beneficiary who has an interest in the remainder of the estate in capital (there is a life tenant with interest in income)
- Remainderman has a vested interest but not in possession
What happens if the remainderman dies before the life tenant?
Should the remainderman die before life tenant, trust property would be transferred to the estate of the remainderman to be distributed according to will or intestacy rules
When does the interest of a beneficiary in a discretionary trust vest?
When an object is selected by a trustee at that point they have a vested right in that part of trust property that the trustee has chosen to. transfer to them
Can a trust ever be both fixed and discretionary?
Yes, elements of both can be used.
How can a sole beneficiary bring a trust to an end?
The beneficiary (assuming they are no longer a minor) can bring the trust to an end at any time by requiring the trustees to convey the whole trust fund to them (or to other trustees)
When can a trust comprising multiple beneficiaries be brought to an end?
Rule in Saunders v Vautier: beneficiaries can end the trust assuming they are ALL -
i. in existence and ascertained
ii. are 18 or over and have mental capacity and
iii. Agree
iv. Absolutely entitled to the interest between them
