Chapter 3- Beneficial Entitlement Flashcards
What is the difference between a capital return and an income return?
A capital return relates to the underlying value of the property in question. A capital gain means that the underlying value of the thing you own has gone up over time.
An income return is money received on a regular basis deriving from property.
What is the difference between an ‘absolute’ and ‘limited’ interest?
A beneficiary with an interest in capital are known to have an ‘absolute’ interest.
A beneficiary with an interest in income only is referred to as having a ‘limited’ interest.
What is a vested interest?
The beneficiary does not have to satisfy any conditions imposed by the terms of the trust before becoming entitled to trust property. The interest is unconditional. If the beneficiary dies before receiving the trust property, it goes to their estate.
What is a contingent interest?
Where there is a condition upon the happening of some future event that may not happen.
What is a successive interest?
Trusts that distribute property over successive generations.
The first generation is known to be the life tenant with a life interest. The next generation is known as the remainder man.
During their lifetime the life tenant receives income arising from the trust property.
What is the rule in Saunders v Vautier?
A sole, adult beneficiary can bring a trust to an end and require the trustees to convey the property to them.
What is a bare trust?
Trustees must handle the trust property as the beneficiary dictates. The beneficiary can bring the trust property as the beneficiary dictates.
What is the extended rule in Saunders v Vautier?
Includes trusts with more than one beneficiary.
As long as all the beneficiaries in the trust who could possibly become entitled:
a) are in existence and ascertained
b) are aged 18 years or over and have mental capacity; and
c) agree to what is being proposed.2
