Beneficial Entitlement Flashcards
What is the rule in Saunders v Vautier?
A trust comes to an end if all* the beneficiaries are:
1. In existence & ascertained
2. 18+ with mental capacity
3. Agree
*They must between them be absolutely entitled to the trust property, ie. no one else with a potential interest in the trust
‘£100k to my trustees to hold on trust for my children who reach the age of 25’
Alex is 28, Ben is 26 and Cam is 23.
Can they bring the trust to an end under Saunders v Vautier?
Yes - they are all absolutely entitled.
If Cam died before turning 25, his interest would fail and vest in Alex & Ben who have already reached 25 - ie. there is no other potential person with an interest in the fund
‘£100k to my trustees to hold on trust for my children who reach the age of 25’
Anna is 22, Bertha is 20 and Cherry is 18.
Can they bring the trust to an end under Saunders v Vautier?
No - whilst they are all 18+, they are not between them absolutely entitled
If they were all to die before 25, the beneficial interest would go back to the settlor under a resulting trust / or pass according to will/intestacy if settlor already dead
ie. There is someone else with a potential interest in the trust fund & their agreement must be sought before the trust can be brought to an end
What is the difference between a vested interest & a contingent interest under a fixed interest trust?
Will have a vested interest if have an unconditional entitlement to the trust property
Will have a contingent interest if their entitlement is conditional on a future event (that might not happen)
What is the difference between an absolute interest and a limited interest under a fixed interest trust?
If have an absolute interest, their interest subsists in the trust capital & income
If have a limited interest, their interest subsists in the trust income only
What is the difference between an interest in possession and an interest in remainder under a fixed interest trust?
In possession = entitled to the trust capital / income now
In remainder = their entitlement is postponed until a prior interest expires
How does beneficial entitlement work in a discretionary trust?
‘To such of [group of individuals] and in such shares as my trustees see fit’
The beneficial interests are a matter for the trustees to decide.
Until they have exercised their discretion, individual members of the class do not have any beneficial entitlement to the trust property
How can a beneficiary’s interest under a fixed interest trust be classified?
Vested OR contingent
Absolute OR limited
In possession OR in remainder
‘Trust for C for life, remainder to D’
What is the nature of their beneficial interests in this fixed interest trust?
This is a life interest trust.
C has a vested interest in the income.
D has a vested interest in the capital, which is postponed whilst C is alive
‘Trust for E for life, remainder to F if 21’
What is the nature of their beneficial interests in this fixed interest trust?
This is a life interest under a trust.
E has a vested interest in the income
If F is 21+, they have a vested interest in the capital, which is postponed whilst E is alive.
If F is 20 or less, they have a contingent interest in the capital
‘To such of [a group of individuals] and in such shares as my trustees see fit’
What is the nature of their beneficial interests under this discretionary trust?
Neither vested nor contingent
No individuals has a beneficial interest unless and until the trustees exercise their discretion
