Beneficial Entitlement Flashcards
What is capital?
The underlying value of a property.
What is income?
Money received on a regular basis deriving from property.
What is an interest in capital and an interest in income only often referred to?
A beneficiary with an interest in capital is often referred to as having an ‘absolute’ interest. A beneficiary with an interest in income only is often referred to as having a ‘limited’ interest.
When does a beneficiary have a vested interest?
If that beneficiary exists and does not have to satisfy any conditions imposed by the terms of the trust before becoming entitled to trust property.
What happens if a beneficiary with a vested interest dies before the trust property is paid over to them?
The trust property will belong to the beneficiary’s estate.
What happens if a beneficiary is a minor?
The trustees will hold the property on trust for the beneficiary until they reach the age of 18 years.
Only once the beneficiary is aged 18 years can the transfer of property to them discharge the trustees from the trust, but this will only happen at the beneficiary’s request.
When does a beneficiary have a contingent interest?
A beneficiary has a contingent interest if it is conditional upon the happening of some
future event that may not happen, or if the beneficiary is not yet in existence.
What happens if a beneficiary with a contingent interest dies before the happening of the stipulated event?
Their interest will go back to the settlor unless the settlor has provided that the beneficial interest should pass to someone else.
How are successive interests in a trust divided?
Into the life interest and the remainder interest.
Who is the life tenant?
The holder of the life interest who receives income arising from the trust property and can have the use and enjoyment of trust property
What is the remainder interest?
A vested interest that is postponed until the death of the life tenant.
What happens if the remainderman dies before the life tenant?
Upon the life tenant’s death, the trust property would be transferred to the remainderman’s estate if his interest had vested.
What are bare trusts?
A trust for a sole, adult, mentally capable beneficiary that gives the beneficiary a vested interest.
The beneficiary of a bare trust is often said to be ‘absolutely entitled’ and can bring the trust to an end at any time by requiring the trustees to convey the whole trust fund to the beneficiary.
What is the rule of Saunders v Vautier?
If there is more than one beneficiary, they can end the trust by calling for a transfer of trust property to themselves
or other trustees, so long as all the beneficiaries under the trust who could possibly become entitled:
Are in existence and ascertained (between them, the people who want to bring the trust to an end must be absolutely entitled);
Are aged 18 years or over and have mental capacity; and
Agree to what is being proposed.
Who is the remainderman?
The holder of the remainder interest who has a vested or contingent interest in trust capital that is postponed.
