8. Trustees’ Powers: Maintenance and Advancement Flashcards
What are trustees’ statutory powers of maintenance and advancement?
Allows trustees to assist certain beneficiaries before their entitlement vests.
What can a settlor do regarding the payment of income or capital to beneficiaries in a trust?
A settlor can either
1. expressly provide in the trust declaration or
2. rely on statutory provisions for early payment of income or capital to beneficiaries.
What happens if a settlor expressly allows early payments in the trust declaration?
the trustees must follow those provisions for paying income or capital to beneficiaries before they formally become entitled to the trust property.
What powers do trustees have for early payments in the absence of an express provision?
trustees can utilize various statutory powers provided by the Trustee Act 1925 to make early payments of income or capital to beneficiaries.
Can the settlor change or exclude the statutory powers regarding early payments?
Yes, the settlor has the flexibility to modify or exclude the statutory powers in the Trustee Act 1925 as much as they wish in the trust declaration.
What is income?
A return paid on a regular basis generated from capital
What are three common examples of income returns?
- dividends paid on shares;
- interest paid on bank accounts; and
- rent paid for the occupation of land.
Under what conditions can trustees use income for the maintenance, education, and benefit of a minor beneficiary according to section 31 of the TA 1925?
Trustees can use income for the benefit of a minor beneficiary if two conditions are met:
1. There is no contrary provision in the declaration of trust.
2. The minor beneficiary must have some kind of interest in income, whether vested or contingent, and there should be no ‘prior interests’ to income.
Can trustees use income for minor beneficiaries with ‘prior interests’ to income?
No. They can only do so for beneficiaries with some kind of interest in income, whether vested or contingent.
In the context of a trust with a life tenant, can trustees use section 31 of the TA 1925 to apply income for a beneficiary?
No. The income must be paid to the life tenant, and their prior interest in income takes precedence.
In applying income for the maintenance, education or benefit of a minor, who should the trustees pay the income to?
- Parent or guardian
- Directly to the maintenance, education, or benefit provider.
What power does Section 31 of the TA 1925 grant to trustees regarding the use of trust income for beneficiaries under 18 years of age?
power to use trust income for the maintenance, education, or benefit of beneficiaries under 18 years of age.
Are trustees obligated to use this power for the benefit of minor beneficiaries?
No. It is entirely at their discretion whether or not to exercise this power for the benefit of minor beneficiaries.
How are adult contingent beneficiaries treated regarding trust income?
Adult contingent beneficiaries are entitled to trust income as it arises, and trustees must pay that income to them while they await the vesting of their beneficial interests.
What happens if an adult contingent beneficiary dies before the condition for their benefit is satisfied in a trust?
Their estate will receive nothing from the trust - including no capital and no accumulated income.
No one else will have the right to reclaim any income that was rightfully paid to the adult contingent beneficiary before their death.
