Advancement of Trust Income / Capital Flashcards
what happens if the trust includes provisions on the advancement of income / capital?
what is there are no such provisions?
The trust may expressly provide for T to pay income or capital to B before they are strictly entitled to it. T must follow these provisions.
If there are no express provisions, T can use statutory powers to do this
S can modify / exclude the statutory powers in the trust
what powers do trustees have?
Power to Pay Income to Beneficiaries Who are Minors
Power to Pay Capital to / for Beneficiaries
what is the difference between a power and a duty?
A “power” is an authority to act, whereas a “duty” is an obligation
explain ‘Power to Pay Income to Beneficiaries Who are Minors’
Ts can pay a minor B income for maintenance, education and benefit if:
o There is no contrary provision in the trust;
o B’s interest is vested or contingent
re: ‘Power to Pay Income to Beneficiaries Who are Minors’
when can Ts pay a minor B income?
when it is for their maintenance, education and benefit and:
o There is no contrary provision in the trust;
o B’s interest is vested or contingent
re: ‘Power to Pay Income to Beneficiaries Who are Minors’
what is the position if B is a remainderman?
If B’s is a remainderman, T cannot exercise this power. Once the LT dies, they can.
re: ‘Power to Pay Income to Beneficiaries Who are Minors’
who is the income paid to?
- The income is to be paid to the parent, guardian or direct to the provider
re: ‘Power to Pay Income to Beneficiaries Who are Minors’
do Ts need to comply with a request from B?
No. Ts have discretion to exercise this power, they cannot be compelled
explain ‘Duty to Pay Income to Beneficiaries with Contingent Interests’
give an example
Ts must pay income to adult Bs who are yet to satisfy the contingency
i.e. B is 18, but their interest is contingent upon them turning 25. Ts must pay B income until her interest vests (i.e. she turns 25)
explain ‘Power to Pay Capital to / for Beneficiaries’
Ts can advance capital before B is entitled if conditions are met
re: Power to Pay Capital to / for Beneficiaries
when can Ts advance capital to Bs?
Ts can advance capital before B is entitled where:
o There is no contrary provision in the trust;
o B has a vested or contingent interest in the capital
o The payment must be for B’s advancement or benefit, i.e.:
o The advancement is within the limits
re: Power to Pay Capital to / for Beneficiaries
explain ‘B has a vested or contingent interest in the capital’
If B is the remainderman, LT must give written consent
Consent of other remaindermen or other Bs not required
re: Power to Pay Capital to / for Beneficiaries
explain ‘the payment must be for B’s advancement or benefit’
It will improve B’s situation (not inc. hobbies, leisure or pleasure)
It must benefit B and not solely someone else, if this is incidental this is permissible
re: Power to Pay Capital to / for Beneficiaries
explain ‘the advancement is within the limits’
Trusts created on or before 1 October 2014 - up to ½ B’s entitlement
Trusts created after 1 October 2014 - up to all of B’s entitlement
(a lifetime trust is created on constitution and a will trust is created on death)
re: Power to Pay Capital to / for Beneficiaries
when is a lifetime trust created?
on constitution
re: Power to Pay Capital to / for Beneficiaries
when is a will trust created?
on death
re: Power to Pay Capital to / for Beneficiaries
if a deduction is made, what must Ts ensure?
Any advancement must be deducted when B receives their full entitlement
i.e. a trust is set up for Adam and Sam. Sam has an advancement of £15k. When their contingent interest vests, Sam will receive half, minus the £15k.
re: Power to Pay Capital to / for Beneficiaries
what happens if an advancement is made before they receive their full entitlement and B dies?
If B dies before they receive their full entitlement, their estate does not need to repay the advancement
re: Power to Pay Capital to / for Beneficiaries
who is the money paid to if B is under 18?
re: Power to Pay Capital to / for Beneficiaries
re: Power to Pay Capital to / for Beneficiaries
must Ts respond to a Bs request?
- Ts have discretion to exercise this power, they cannot be compelled
