Chapter 5: Beneficial Entitlement Flashcards
what are the types of beneficial entitlement?
vested
contingent
what are vested interests?
beneficiary has a rightful claim to the trust assets
vested in possession
vested in interest
what does vested in possession mean?
a present right to present enjoyment
what does vested in interest mean?
has a right but only entitled to use it in the future
what happens if a person with vested interest dies?
cannot be lost - interested will pass to the estate
what are the conditions of vesting?
beneficiaries must be ascertained or ascertainable (test)
must be ready to take possession (no prior interest)
what is contingent interest?
Beneficiary must meet a condition before they can benefit from a trust
what happens if the beneficent of a contingent interest dies?
The right is lost
how to identify a vest interest
Clear intention for the beneficiary to be entitled to trust assets/ benefits
no gift over
how to identify a contigent interest
condition not met = not entitlement to assets
no intention for anyone to benefit if the condition is not met
normally a gift over
what is the perpetuity period?
‘lives in being’ plus 21 years (cut off) - all lives in being must have died + 21 years of the last survivor.
what is an implied live in being?
everyone who is alive at the date of settlement and implicated in the settlement.
what can a settlor do to avoid perpetuity period?
expressly adding a period of up to 125 years.
what happens if a contingency is not met in the period specified?
fails and go back to settlors estate or gift over.
what rights do beneficiaries have in a fixed trust?
can enforce payments in accordance with the terms of the trust
what rights do beneficiaries have in a discretionary trust?
no automatic right to payment
only right to be considered by trustees
what rights do beneficiaries have in a bare trust?
full control over trustees actions
trustees must comply with instructions of the beneficiary
what are the conditions for Saunders v vautier to apply?
- sui juris (18 & no disability)
- if more than one beneficiary then must be together absolutely entitled and agree to transfer legal interest
- terminates the trust
what type of trusts can beneficiaries terminate?
