Chapter 3: Beneficial Entitlements

Question 1

1 Beneficiaries

Answer 1

Traditionally, trusts were established to benefit individuals. The core trust concept involves splitting the ownership and management of property, allowing the trustee to take on the burden of ownership while the beneficiary obtains all the benefit. As we saw in the ‘Introduction’ chapter, trusts work by having both a proprietary and an obligation component.

From the perspective of the beneficiary this means that they have both equitable proprietary interests in the trust property and personal rights to enforce the trust
against the trustee. This ability to enforce the trust is crucial and gives rise to two interrelated principles which highlight the importance of beneficiaries.

Question 2

(a) The beneficiary principle

Answer 2

As a general rule, a trust must have a beneficiary. This is because the beneficiary is the person who is able to hold the trustee to account. Without someone who has the ability to take the trustee to court if they do not perform their obligations, the obligation component of the trust is meaningless. And if there is no enforceable obligation, the trustee can effectively do whatever they want with the property, effectively making them the absolute owner of that property. This is incompatible with the notion of a trust. (There are some exceptions to the beneficiary principle, namely charitable and non-charitable purpose trusts, which are
covered in the chapter on ‘Purpose trusts’.

Question 3

(b) Certainty of objects

Answer 3

A related principle is that of certainty of objects. Generally, the objects of a trust will be the beneficiaries (or in the case of a discretionary trust, the potential beneficiaries). It is essential
that there is certainty as to who those objects are. Again, this is key to enforceability of the obligation component. If the objects are uncertain, the trustee does not know to whom they owe their obligations. The objects themselves may therefore not know of their rights and are unable to enforce them. And, of course, the court cannot enforce obligations if those
obligations are not clear.

Question 4

(b) Certainty of objects

Answer 4

It is therefore important for the proper administration of a trust that the objects and their
rights are ascertainable. Certainty of objects is covered in the chapter on ‘The three certainties’. The precise rights of the objects of a trust will depend on the terms of that trust.
However, there are some broad rights which will always apply, because they go to the very nature of the trust. These rights vary depending on whether the trust is fixed or discretionary.

Question 5

1.1 Proprietary rights

Answer 5

Fixed trust: A trust in which the entitlement of the beneficiaries is fixed by the settlor (also
known as a ‘fixed interest trust’).

Discretionary trust: A trust under which the trustees have a discretion to distribute between the objects of the trust.

Question 6

1.1.1 Fixed trusts

Answer 6

The beneficiaries of a fixed trust have equitable proprietary rights. These rights are assets which
are capable of sale or other forms of transfer and can be asserted against third parties (for example, if a trustee gives away the trust property, the beneficiary can assert their equitable
rights against the new legal owner). The beneficiaries’ right may be vested (in other words they have a current right) or contingent (meaning their right is conditional).

Question 7

1.1.2 Discretionary trusts

Answer 7

In contrast, the objects of a discretionary trust do not have proprietary rights, at least not in the
true sense, although some of their rights are akin to proprietary rights. Until the discretion is exercised, all the objects have is a hope that that discretion will be exercised in their favour. They cannot assert their rights against third parties although they do have sufficient interest in the
trust property to compel its return to the trust fund

Question 8

1.2 Personal rights

Answer 8

The objects of trusts also have personal rights. The beneficiaries of a fixed trust have the right to
compel the proper administration of the trust by the trustees, meaning they can direct the trustee to take action such as suing a third party on behalf of the trust. Beneficiaries can always sue the trustees for breach of trust if they act outside their powers or in breach of their duties (although
any compensation will be paid back to the trust fund rather than the individual). They also have the right to be informed of their entitlement under the trust once their interest has vested

Question 9

1.2 Personal rights

Answer 9

The objects of discretionary trusts have similar rights although they are more limited because they do not have proprietary interests in the trust fund, at least not in the true sense. They can enforce the trust by asking the court to ensure that the discretion is exercised (whether by the trustees, by appointment of new trustees or by the court itself) but they have no right to request that it is exercised in a particular way.

Once a discretion has been exercised in favour of an individual, they have the right to be informed of their entitlement. Like the beneficiaries of fixed trusts, they can also sue the trustee for breach of trust and require the trustee to personally compensate the trust fund for any loss

Question 10

2 Fixed and discretionary trusts

Answer 10

In this section we will explore beneficial entitlement, focusing on the difference between the rights
of beneficiaries under fixed trusts and discretionary trusts. We will also compare discretionary trusts with powers of appointment.

Question 11

2.1 Fixed trusts

Answer 11

The trustees of a fixed trust have no discretion in relation to the distribution of the trust property.
They must distribute as directed by the settlor. A fixed trust can have one or more beneficiaries, and those beneficiaries may have very different
entitlements in respect of the trust property. The following examples will introduce you to some common forms of fixed trust.

Question 12

Example: Fixed trust - sole beneficiary

Answer 12

The simplest example of a fixed trust involves the trustee(s) holding the entire trust property for
one beneficiary.
* The trustee has the legal right to deal with the trust property as owner but they must exercise
this right for the beneficiary.
* 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. They are the sole beneficial owner
of the trust property (including any income produced by that property).

Question 13

Example: Fixed trust - beneficiaries with fixed shares

Answer 13

A fixed trust can also have multiple beneficiaries. A simple example is a trust where the trust property is held for A and B in equal shares. As with the previous example, this is a fixed trust because the beneficial entitlement is fixed by the settlor and the trustees have no discretion as to how the trust property is distributed.
* Both beneficiaries have proprietary rights in the trust property, and both have personal rights
against the trustee to enforce the trust.
* Together, they are entitled to the entire beneficial interest in the trust property but separately
each is only entitled to a 50% share (of both capital and income).

Question 14

2.1.1 Successive interest trusts

Answer 14

Successive interest trusts are another type of fixed trust. They give some beneficiaries a right to income while others are entitled to capital.

Question 15

Successive interest trust

Answer 15

A trust involving a series of consecutive interests in the same trust property

Question 16

Life interest trust

Answer 16

A common type of successive interest trust, involving a beneficiary receiving income during their lifetime, with another beneficiary or beneficiaries becoming entitled to the capital after the income beneficiary’s death

Question 17

Income beneficiary

Answer 17

The beneficiary entitled to the income produced by a successive interest trust. (Traditionally the income beneficiary of a life interest trust is known as the ‘life tenant’.)

Question 18

Capital beneficiary

Answer 18

The beneficiary entitled to the capital held on a successive interest trust.
(Traditionally the capital beneficiary of a life interest trust is known as the ‘remainderman.)

Question 19

Example: Life interest trust

Answer 19

A house on trust to A for life, remainder to B.
* In this example, A receives the income produced by the house during their lifetime. When A
dies, B receives the house itself. Together they hold the entire beneficial interest in the house,
but A is only interested in the income and B is only interested in the capital.
* This is a common way to leave property via will, as it allows testators to provide for their
spouse but ensures that the spouse cannot disinherit their children when they die. In our example, A would have a right to live in the house during their lifetime but could not leave the house to anyone in their own will because they only have a life interest.

Question 20

Example: Successive interest trust with multiple capital beneficiaries

Answer 20

A house on trust for A for life, remainder to B and C in equal shares.
* This example is a combination of two examples we have looked at previously. In this case, A is
entitled to the income produced by the trust property.
* When A dies, the capital is shared equally between B and C. Together, A, B and C have the entire beneficial interest in the trust property, but A is only entitled to income while B and C are entitled to capital.

Question 21

Example: Successive interest trust with contingent capital interest

Answer 21

A house on trust for A for life, remainder to B if he survives A and, if not, to C.
* This example is more complicated as it involves a ‘contingent’ interest. As in the previous example, A is entitled to the income produced by the house.
* What happens to the house on A’s death depends on whether B is still alive. If B is alive, B receives the house. If B has died, C receives the house. (If C has also died, C’s estate will receive it.)
* Although it is not known from the outset of the trust whether B or C will receive the capital, this
is still a fixed trust. There is a clear mechanism for determining who receives the capital. At the
point when the capital must be distributed (A’s death), the trustees can determine entitlement

Question 22

2.2 Discretionary trusts

Answer 22

As we have seen, the trustees of fixed trusts do not have a discretion in relation to the distribution
of the trust property. By way of contrast, the trustees of a discretionary trust do have a
distributive discretion. Although the settlor determines the potential beneficiaries of the trust (known as the ‘objects’ of the trust), the trustees must determine who from within that class of objects is to receive what sum. (Discretionary trusts are sometimes described as a ‘power in the nature of a trust.’)

Question 23

2.2 Discretionary trusts

Answer 23

Discretionary trusts are flexible. They enable a settlor to make provision for different beneficiaries according to their future needs. The objects of a discretionary trust are only potential beneficiaries. They have no equitable interest in the trust property until the discretion is exercised in their favour. They do, however, have a right to ensure that the trustees exercise their powers properly.

Question 24

Example: Discretionary trusts

Answer 24

Consider the example of a settlor who leaves £10,000 in their will on discretionary trust for their
wife and three children. The wife and children are the objects of the trust. It is up to the trustees to decide how to divide the property between them.

Question 25

Example: Discretionary trusts

Answer 25

• The trustees must exercise their discretion and must do so within a reasonable time. (The trust document may specify the time by which the discretion must be exercised. If not, what is ‘reasonable’ will be determined on the facts.) If the trustees do not exercise their discretion, any of the objects can sue to enforce the trust and ensure that the discretion is exercised.
• However, the objects cannot compel the exercise of the discretion in their favour as they do not have proprietary rights in the trust property. They merely have a hope that they will receive something.
• The objects also have a right to ensure that the trust is administered properly. This means they can sue the trustees for breaches of trust such as improperly investing the trust fund or making distributions to non-objects. Any compensation awarded as a result of such a breach will be payable to the trust fund, not the claimant objects.

Question 26

2.3 Powers of appointment

Answer 26

It is helpful to contrast discretionary trusts with powers of appointment.

Question 27

Power of appointment

Answer 27

A right to choose who, from within a specified class of objects, receives
property.

Question 28

Donor

Answer 28

The person who confers the power.

Question 29

Donee

Answer 29

The person who receives the power

Question 30

Fiduciary power of appointment

Answer 30

A power of appointment given to a trustee. The trustee does not need to exercise it but must periodically consider whether to do so.

Question 31

Personal power of appointment:

Answer 31

A power of appointment given to someone who is not a trustee. They are not even required to consider exercising it.

Question 32

Donee’s complete discretion

Answer 32

The essence of a power is the donee’s complete discretion. They can choose whether to exercise
the power. If exercised, they have a discretion as to which member(s) of the class of objects should benefit from its exercise. The objects of a power therefore have even more limited rights than the objects of a discretionary trust.

They cannot compel the exercise of the power but can constrain an improper exercise. Powers are not trusts but it is common for trusts to include powers. Often (but not necessarily) the trustee will be the donee

Question 33

2.3.1 Powers of appointment: Key features

Answer 33

As we have seen, the key difference between a power of appointment and a discretionary trust is
that there is no obligation on the donee to exercise a power of appointment, whereas the trustees
of a discretionary trust must exercise their discretion. Because a power does not have to be exercised, it is good practice for the donor to make clear what will happen to the property if it is not. This is sometimes described as a ‘gift-over’ in default of the exercise of the power

Question 34

Helpful indicators

Answer 34

(a) Imperative wording such as ‘must’ suggests a discretionary trust whereas permissive wording
such as ‘may’ suggests a power of appointment.
(b) If discretion has been given to a third party (not a trustee) it is a power of appointment, not a
discretionary trust.
(c) The presence of a gift-over indicates a power of appointment (because it means the power
does not need to be exercised) but lack of a gift-over is not determinative.

Question 35

3 Vested and contingent interests

Answer 35

In order to understand the rights of beneficiaries under a trust it is important to appreciate the
difference between vested and contingent interests.

Question 36

Vested interest

Answer 36

A current right to property. Nothing more needs to happen for the beneficiary to become entitled to the property.

Question 37

Contingent interest

Answer 37

An interest in property which is conditional upon the occurrence of an uncertain future event. Contingent interests become vested if the condition is satisfied. The
beneficiary has no entitlement unless and until the condition is satisfied.

Question 38

3.1 Vested interests

Answer 38

As we have already seen, a vested interest is a current entitlement to property. Vested interests may be sub-divided into interests which are vested ‘in interest’ only and interests
which are vested ‘in possession’.

Question 39

Vested in possession

Answer 39

A current right to current enjoyment of the property.

Question 40

Vested in interest

Answer 40

A current right to future enjoyment of the property.

Question 41

Example: Vested interests

Answer 41

A common example which involves both types of vested interest is a successive interest trust, involving both life and remainder interests. Take a situation where a house is held on trust for a woman for life, with the remainder to the woman’s son.

Question 42

Both the woman and her son have vested interests:

Answer 42

• The woman’s interest is vested in possession. She has a current right to current enjoyment of
  the property.
• Her son’s interest is vested in interest. He has a current right to the property but he is not
  entitled to the enjoyment of that property until the woman dies.

Question 43

Interest as not contigent

Answer 43

Note that the son’s interest is not contingent. He does not obtain the house if the woman dies but
when she dies. You may query what will happen if the son dies before the woman. Is his interest not contingent on living longer than his mother? The answer is no. The son’s interest forms part of his estate (and can pass under his will or intestacy).

Question 44

3.2 Contingent interests

Answer 44

Contrast the example above with the case where a settlor creates a trust of a house for a woman for life, remainder to her son if he survives her, and if not, to charity.

Question 45

3.2 Contingent interests

Answer 45

In this example the son’s interest is contingent. His interest will only vest if he is alive when his mother dies. His contingent interest cannot pass to his estate if he dies before the woman. Instead the charity would be entitled to the house on the woman’s death.

Question 46

3.2 Contingent interests

Answer 46

The provision in favour of the charity is known as a ‘gift-over’. It is a clear indication that the
son’s interest was intended to be contingent.

Question 47

3.2 Contingent interests

Answer 47

Lack of a gift-over will not be fatal to the creation of a contingent interest. In this example, even without the gift-over, the use of the word ‘if’ makes it very clear that the son’s interest will not survive his death if he predeceases his mother. The remainder interest will return to the
settlor on a resulting trust.

Question 48

4 Capital and income

Answer 48

In this section, we consider beneficial entitlement to both capital and income. If you are unsure of the distinction between these terms, a helpful way to think of it (which is often given in case law) is that capital is like a tree whereas income is the fruit produced by the tree. Just as a tree produces fruit on a regular and recurring basis, a capital asset may produce income.
* A common example is land, which is a capital asset that may produce rental income.
* Similarly, money held in a bank account is capital which produces interest.
* Shares are also capital assets, which produce dividends.

Question 49

4.1 Trusts with a sole beneficiary

Example: Sole beneficiary, absolutely entitled

Answer 49

Let’s start by considering the very simplest example of a trust involving a sole beneficiary who is
absolutely entitled to the trust property. So we are considering the situation where a trustee is
holding the entire trust property (in our case a piece of land) on trust for one beneficiary. The trustee is clearly holding the capital (ie the land itself) on trust for the beneficiary. Nobody else has any beneficial entitlement to this trust property. It follows that if the trust is producing income
(ie if the trustee is renting the land out), the beneficiary is also beneficially entitled to this income

Question 50

Example: Sole beneficiary, absolutely entitled

Answer 50

If the beneficiary is an adult, they are entitled to receive that income as it arises. In other words, the trustee must pay it to them when it is received. If the beneficiary is a minor, the position is more complicated. They will not be entitled to receive the income as it arises, but the trustees may have a power to apply it for their benefit (known as a power of maintenance). The dispositive
powers and duties of trustees are considered in more detail in the chapter on ‘Trustees powers and
duties’.

Question 51

Example: Sole beneficiary, future interest

Answer 51

‘My trustees must hold my house on trust for my daughter until she reaches age 21, and then
transfer it to her absolutely.’

Question 52

Example: Sole beneficiary, future interest

Answer 52

Here, we have the trustees holding a house on trust for the settlor’s daughter until she reaches age 21, after which they are required to transfer it to her.

Question 53

Example: Sole beneficiary, future interest

Answer 53

The daughter has a vested interest in the capital ie the house itself. The trust is intended to subsist until she reaches age 21 but there is no condition imposed upon her right to the capital. Her interest in the capital is therefore vested in interest now and will vest in possession when
she reaches the age of 21.

Question 54

Example: Sole beneficiary, future interest

Answer 54

• The daughter’s entitlement to the income is the same as the beneficiary in our first example.
  Nobody else has been given an interest in the income which arises in the time period between the trust being established and the beneficiary’s capital interest vesting in possession (known as the ‘intermediate income’). The capital interest is therefore described as ‘carrying’ the intermediate income, meaning it attaches to the capital interest.

Question 55

Example: Sole beneficiary, future interest

Answer 55

Like in our previous example, the daughter will be entitled to the income as it arises if she is 18
or older. If she is under 18, the position will depend on the dispositive powers and duties of
trustees, which are considered in the chapter on ‘Trustee powers and duties’.

Question 56

Example: Contingent interests

Answer 56

‘My trustees must hold my house on trust for my daughter if she reaches the age of 21.’
* This time, we have the trustees holding the house for the daughter if she reaches the age of 21.
Her interest in the capital is therefore contingent.
* Nobody has been given a separate interest in the income, meaning the capital interest therefore carries the intermediate income. If the daughter is over 18, she is entitled to receive
the income as it arises. If she is under 18 it will be accumulated.

Question 57

4.2 Successive interest trusts

Answer 57

As we have already seen, a successive interest trust involves separate beneficial interests which
follow each other. The beneficiary with an entitlement to the income receives their interest first (for
a designated period of time), followed by the beneficiary with the interest in the capital.

Question 58

4.2 Successive interest trusts

Answer 58

Although we have given the example of a life interest trust, it is also important to note that this is
not the only way to create a successive interest trust. An interest in income does not have to be
created for the lifetime of the beneficiary. It could be limited in some other way. For example, it
could be a trust of income for A until they reach the age of 18 and then payment of the capital to B.

Question 59

4.2 Successive interest trusts

Answer 59

Or even a series of interests in the income over time, perhaps to a settlor’s children, then grandchildren, but ultimately the trust must provide for an interest in the capital to vest in a beneficiary (or charity) within the statutory perpetuity period of 125 years. (Perpetuity is considered in the chapter on ‘Perpetuity’.)

Question 60

5 The rule in Saunders v Vautier

Answer 60

The basic principle in Saunders v Vautier is that a sole adult beneficiary of sound mind, with a
vested interest in the trust property, is entitled to direct the trustee to transfer legal title to them,
thereby bringing the trust to an end early.

Question 61

5 The rule in Saunders v Vautier

Answer 61

A beneficiary is only able to do this if they are absolutely entitled to the trust property. If someone else could obtain a beneficial interest (eg the beneficiary’s interest is contingent or could be affected by the exercise of a power of appointment) the beneficiary has no entitlement to have it transferred to them and become the absolute owner.

Question 62

Key case: Saunders v Vautier (1841) 4 Beav 115

Facts

Answer 62

Facts: Under a testamentary trust, shares were held for Vautier until he reached the age of 25, with a requirement to accumulate the income from the trust (ie the dividends) until then. There was no gift-over. When he reached the age of majority (21 at the time), Vautier claimed a right to have the trust property transferred to him on the basis that he had a vested interest in it

Question 63

Key case: Saunders v Vautier (1841) 4 Beav 115

Judgement

Answer 63

Held: Vautier’s interest was vested. The intention was not to make his interest conditional upon
surviving until age 25 but merely to delay enjoyment of the property until such time. The absence
of a gift-over indicated that the testator had not intended the property to pass to anyone else. If
Vautier wished to receive it early, that was his right

Question 64

5.1 Extension of the rule in Saunders v Vautier

5.1.1 Beneficiaries with vested interests

Answer 64

The rule has subsequently been extended to cases involving multiple beneficiaries. If each beneficiary has a distinct interest in the trust property, which can be severed without impacting the others, they can separately exercise their Saunders v Vautier rights.

A simple example is a fixed trust in equal shares, where one beneficiary is an adult and the other is a minor. As long as the trust fund is easily divisible, the adult beneficiary can require the trustee to transfer their share to them. They cease to be a beneficiary and the remaining half of the fund is held entirely for the minor.

Question 65

5.1.1 Beneficiaries with vested interests

Answer 65

Saunders v Vautier rights can also be exercised by the beneficiaries of more complicated fixed
trusts, such as successive interest trusts. However, because the rights of the beneficiaries under
such trusts are not easily severable, it can only be done if all the beneficiaries agree (and they
must all satisfy the conditions relating to age and capacity).

In such circumstances, the beneficiaries may direct the trustee to transfer the trust fund to them
(in such shares as they choose). This is because collectively they are absolutely entitled to the trust property.

Question 66

Example: Multiple beneficiaries with severable interests

Answer 66

A trustee holds £2,000 for A and B in equal shares, to be distributed when they reach the age of 25. A is 17. B has just turned 18 and has asked the trustees to transfer their share of the trust fund to them

Question 67

Should the trustees transfer B’s share as directed?

Answer 67

• A and B both have vested interests in the trust fund. They have fixed shares (£1,000 each).
• As an adult beneficiary with a vested interest, B has Saunders v Vautier rights so the trustees
  must comply with B’s request, bringing the trust to B for an end.
• They must continue to hold A’s £1,000 on trust. Once A reaches 18, they will also have Saunders v Vautier rights and can request the capital if they choose to do so. If they do not, it will be held on trust until they are 25.

Question 68

Example: Multiple beneficiaries with successive interests

Answer 68

A trustee holds property on trust for A for life, remainder to B. A is 50 and B is 17. They have asked the trustees to share the trust fund equally between them.

Question 69

Should the trustees distribute the trust fund as directed by A and B?

Answer 69

A has a vested interest in the income and B has a vested interest in the capital. Their interests are not severable and neither can exercise Saunders v Vautier alone.

Question 70

Should the trustees distribute the trust fund as directed by A and B?

Answer 70

• As B is a minor, A and B cannot yet exercise Saunders v Vautier together and the trustees must not distribute the capital in accordance with their request.
• Once B reaches the age of 18, they will have Saunders v Vautier rights. If A and B make the request once B turns 18, the trustees must transfer the fund as directed.

Question 71

5.1.2 Objects without vested interests

Answer 71

The effect of the extension above means that Saunders v Vautier rights are not strictly exercisable
only by beneficiaries with vested interests. Beneficiaries with contingent interests may exercise those rights but only if they act together with all the other persons who share the beneficial interest in the property. In the case of contingent interests, this will include the objects of any gift-over

Question 72

5.1.2 Objects without vested interests

Answer 72

This means that Saunders v Vautier can also be exercised by the objects of a discretionary trust or even the objects of a fiduciary power which has a gift-over in default of appointment. Even though none of the objects have vested interests in the trust property, together they can be treated as a single object in whom the interest subject to the discretion or power is vested. Again,
as long as they are all adults of sound mind, they can agree to collapse the trust and share the
property between them.

Question 73

Practical limitations: Large and complex trusts

Answer 73

Although all the objects of a large, complex trust could exercise Saunders v Vautier together, this is
very unlikely to happen in practice, particularly in the case of large discretionary trusts where the
objects may not all be identifiable let alone able to reach a consensus.
It is more likely to occur in the case of very small discretionary trusts with a closed class of objects
(such as testamentary trusts for the children of the testator, who could decide to collapse the trust
once they are all over 18).

Question 74

Legal limitations

Answer 74

There are also legal limitations on the rule in Saunders v Vautier, which stem from the nature of
the trust itself. The rule acknowledges that the objects of trusts are the true owners of the property and should not be denied the right to manage their own property should they wish to

Question 75

Legal limitations

Answer 75

However, it does not mean that they are able to interfere in the administration of a trust while it
subsists. They have a choice between the following:
(a) Exercising their Saunders v Vautier rights by directing the trustee to transfer the property out
of the trust (whether to them or to a third party); or
(b) Remaining objects of the trust and allowing the trustees to continue to act in accordance with
trust terms.

Question 76

Legal limitations

Answer 76

If the beneficiaries are not happy with the administration of the trust, they may seek appropriate
remedies (including removal and replacement of the trustee) but they cannot tell the trustee how
to perform their role. If they wish to vary the trust terms, they could exercise the Saunders v Vautier rights and create a new trust on those terms.

Question 77

6 Beneficial entitlement: Consolidation

How to analyse a fact pattern
in an assessment

Answer 77

Firstly, if the question requires you to distinguish between vested and contingent interests, make sure that you look out for conditional wording such as ‘if’. This indicates a contingent interest. The presence of a gift-over is also good evidence of a contingent interest but is not
essential.

Question 78

6 Beneficial entitlement: Consolidation

Answer 78

Secondly, If an interest is vested, it could be either vested in possession or vested in interest. If it’s vested
in possession, you can expect the beneficiary to be obtaining the benefit of the property immediately. Like the life tenant in a life interest trust. A right which is vested in interest only is an unconditional right to benefit in the future. Like the remainder interest under a life interest trust.

Question 79

6 Beneficial entitlement: Consolidation

Answer 79

If a question requires you to consider the rule in Saunders v Vautier your analysis will depend
on the terms of the trust. If it is a straightforward trust for a sole beneficiary, it is important to
check whether they are over 18, of sound mind and have a vested interest in the property. If
these conditions are met, they can collapse the trust.

Question 80

6 Beneficial entitlement: Consolidation

Answer 80

If there are multiple beneficiaries, you need to look more closely. If there is a fixed trust, a key
question will be whether the interests of the beneficiaries are severable. If not, they will all need
to meet the conditions for exercising Saunders v Vautier and agree to do so. This will always be
the case for successive interest trusts.

Question 81

6 Beneficial entitlement: Consolidation

Answer 81

The same is true of discretionary trusts and trusts where a beneficiary has a contingent interest. It is necessary to identify all the people who are potentially entitled to the property, including anyone who has an entitlement under a gift-over. They must all be over 18, of sound
mind and agree to collapse the trust. No single beneficiary can do so alone in such cases because they do not have vested interests