Beneficiaries Flashcards
What rights does a beneficiary have under a fixed trust?
FIXED TRUSTS
- Under a fixed trust, a beneficiary has an entitlement which is fixed. This is a right to a particular proportion or part of trust property. The right may be vested or contingent. The beneficiary has a right to enforce this entitlement.
What rights does a beneficiary have under a discretionary trust?
DISCRETIONARY TRUST
- Under a discretionary trust, a beneficiary does not have an entitlement to any of the trust property, only a hope that the trustees will exercise discretion in their favour. They can, however, sue for mismanagement of the trust or to enforce the exercise of discretion (BUT cannot require that discretion be exercised in their favour).
What rights does a beneficiary have under a power of appointment?
Under a power of appointment, the beneficiary’s cannot even sue to make the trustee or third party exercise their power of appointment. Can only sue if it is exercised improperly. Have no real rights under this.
How is a POA distinguished from a discretionary trust?
“My trustees must” = discretionary trust.
“My trustees may” = POA and often includes gift-over.
May be fiduciary (exercised by trustee) or personal (exercisable by someone other than a trustee). Objects of a POA can only constrain the proper exercise of the power by the trustee.
What are the 3 types of interest that may be held by a beneficiary?
- Vested in possession
- Vested in interest
- Contingent
What is an interest vested in possession?
Beneficiary receives interest absolutely and entitled to property currently. i.e income from house in successive interest trust.
What is an interest vested in interest?
A current right to future enjoyment, i.e the right of the remainderman in a successive interest trust. They will receive the capital when the life tenant dies.
What is a contingent interest?
The right to benefit from the trust is contingent on some future event which may or may not happen (e.g if Dina reaches the age of 25, my car). OR “if my husband predeceases me, to my son and daughter in equal shares”).
Will often include a gift-over in case contingency never satisfied.
When can a trust be terminated by the beneficiaries?
- By Sole Adult beneficiary of sound mind with a vested interest. Here, vested was satisfied where “until he reaches 25” was not contingent, no gift over and clear didn’t want gift to go to anyone else.
- By one adult beneficiary of sound mind where there are other beneficiaries (e.g a minor interest also) but the interest is severable (e.g fixed trust in equal shares).
- Where not easily severable (e.g successive interest trust, discretionary trust) and there are multiple beneficiaries, by agreement of ALL of the beneficiaries (provided they are all adults and of sound mind).
