Beneficiaries Flashcards
What is Beneficial Entitlement?
The trustee(s) hold the trust property for the beneficiaries and owe obligations to them. The nature of those obligations depends on the type of trust.
What is a Fixed Trust?
The trustees have no discretion in relation to the distribution of the trust property.
Can the settlor instruct trustees in a Fixed Trust?
The settlor cannot tell the trustees what to do once the trust has come into effect, unless they have reserved a power to do so.
What rights does a Sole Beneficiary have?
The beneficiary has personal rights against the trustee and can sue to enforce them. They also have an equitable proprietary interest in the trust property.
What rights do beneficiaries with fixed shares have?
Both beneficiaries have proprietary rights in the trust property and personal rights against the trustee to enforce the trust.
What are Successive Interest Trusts?
Such as life interest trusts where one beneficiary receives income during their lifetime and another being entitled to capital after death.
E.g. A house on trust for A for life, remainder to B and C in equal shares.
What is a Contingent Interest?
An interest that does not take place until a condition is satisfied.
E.g. A house on trust for A for life, remainder to B if he survives A and, if not, to C.
What is a Discretionary Trust?
A trust where the settlor determines potential beneficiaries (objects), but trustees decide who receives what sum.
What rights do potential objects in a Discretionary Trust have?
Potential objects have no equitable interest until the discretion is exercised in their favour.
What rights do objects have in a Discretionary Trust?
Objects have a right to ensure trustees exercise their powers properly, including using discretion and acting within a reasonable time.
What is a Power of Appointment?
A right to choose who, from a specified class of objects, receives property.
What discretion do donees have in a Power of Appointment?
Donees have absolute discretion as to which member(s) of the class of objects should benefit from its exercise.
How do the rights of objects in a Power of Appointment compare to those in a Discretionary Trust?
Objects of a power have more limited rights than those of a discretionary trust; they cannot compel the exercise of the power but can constrain an improper exercise.
What is the key difference between a Power of Appointment and a Discretionary Trust?
There is no obligation on the donee to exercise a power of appointment, while trustees of a discretionary trust must exercise their discretion.
What is a gift-over?
A gift-over indicates what happens to property if a power is not enforced; it indicates a power of appointment but is not determinative.
What is a vested interest in property?
A vested interest in property refers to a beneficiary’s current rights to the property.
What does ‘vested in possession’ mean?
A beneficiary whose interest is ‘vested in possession’ has a current right to current enjoyment of the property.
What does ‘vested in interest’ mean?
A beneficiary whose interest is ‘vested in interest’ has a current right to future enjoyment of the property.
What is a contingent interest?
A contingent interest becomes vested if the condition is satisfied.
What happens if the condition for a contingent interest is not satisfied?
The beneficiary has no entitlement unless and until the condition is satisfied.
