Beneficial entitlement

Question 1

What are other ways to describe beneficiary interest?

Answer 1

• equitable title
• equitable interest
• beneficial interest

Question 2

What are the two ways a beneficiary’s interest can be?

Answer 2

Vested or contingent

Question 3

What is a vested interest?

Answer 3

A beneficiary with a vest interest has a rightful claim to the trust assets. The vested interest can take effect in possession or in remainder

Question 4

What is a contingent interest?

Answer 4

If the beneficiary must meet a condition before they can benefit from the trust - the beneficiary has no rights until the condition is met. Once met, it becomes a vested interest

Question 5

What is the perpetuity period?

Answer 5

‘lives in being’ plus 21 years

Question 6

What are the beneficiaries ‘ rights in a fixed trust?

Answer 6

The beneficial interest of each beneficiary is fixed and they have an automatic right to payment in accordance with the terms of the trust

Question 7

What are the beneficiaries’ rights in a discretionary trust?

Answer 7

Beneficiaries do not have an automatic right to payment and have no proprietary interest in the trust assets unless and until the trustees decide to distribute. They only have a right to be considered, they may never benefit

Question 8

What is a bare trust?

Answer 8

A bare trust arises when trustees are holding property for the sole benefit of an adult beneficiary. The beneficiary has full control over the actions of the trustees in relation to the trust property and the trustees must comply with the beneficiaries instructions

Question 9

What did the court rule in Saunders v Vautier [1841]?

Answer 9

The court ruled that a sole beneficiary who is sui juris and is absolutely entitled to the whole beneficial interest may compel trustees to transfer the legal title to them thereby terminating the trust

Question 10

What has the rule in Saunders v Vautier been extended to?

Answer 10

It has been extended to apply to a group of beneficiaries if all the beneficiaries are sui juris and together absolutely entitled, they may agree to bring the trust to an end by calling the trustees to transfer the legal title to them

Question 11

Can the rule in Saunders v Vautier apply to discretionary trusts?

Answer 11

The rule is applicable where the trustees are required to distribute the whole of the trust fund but they have discretion as to who should benefit and how much to pay - it is possible to treat all beneficiaries as though they are one person