Beneficial entitlement Flashcards
What is a capital return on trust property?
A return which relates to the underlying value of the property in question.
e.g. market value of a house
What is an income return on trust property?
A return of money or equivalent on a regular basis which derives from the property in question.
e.g. rent of a let house
If a beneficiary has an interest in capital, what is their interest classified as?
Absolute
If a beneficiary has an interest in income, what is their interest classified as?
Limited
What is a vested interest?
Where the beneficiary exists and does not have to satisfy any conditions imposed on them by the the terms of the trust before becoming entitled to the property.
What is a contingent interest?
Where an interest is conditional upon the happening of some future event or the existence of a beneficiary.
Once they satisfy the condition, the beneficial interest vests and they have a vested interest.
What happens if a beneficiary dies before a contingent interest is vested?
Unless the settlor has provided that the beneficial interest should pass to someone else, it returns to the settlor.
What is a successive/life interest trust?
Where property is held in trust for a succession of beneficiaries.
In a discretionary trust, when does an object become entitled to the trust property?
Within a class, it is when a trustee exercises their discretion to distribute property.
An individual will become a beneficiary when they become a trustee.
What is a bare trust and what is an example?
The trustee holds assets for a beneficiary, but the beneficiary has the right to access the assets at any time.
Example - a stockbroker holds a portfolio of shares they are managing on a bare trust for their client.
Can a bare trust exist for multiple beneficiaries?
Yes, provided all the beneficiaries are:
In existence and ascertained
18 years old or over and have mental capacity
Agree to what is being proposed
If a beneficiary dies before achieving the contingency, does it pass to their estate?
No, the trust assets will revert to the settlor’s estate.
What type of interest does a life tenant hold in the trust fund?
A limited income in trust income only. The trust capital will belong to the successive beneficiary once they die.
What is required to bring a trust to an end?
Anyone who is absolutely entitled to the trust fund (i.e. cannot be income only).
Where a remainder interest has vested, they are entitled to decide if it should come to an end.
They must also be 18.
