Express trust: Beneficial entitlement Flashcards
What is the beneficiary principle?
The beneficiaries are able to take the trustee to court in case of lack of performance of their obligations.
Necessary to keep the trust property from becoming an absolute property.
Beneficiary’s Proprietary rights in a fixed trust?
A trust in which the entitlement of the beneficiaries is fixed by the settlor.
They have equitable proprietary rights - capable of being asserted against third parties in the case of a sale or other form of transfer.
Beneficiaries may have a vested right (current right) or contingent right (conditional).
Beneficiary’s Proprietary rights in a discretionary trust?
A trust under which the trustees have a discretion to distribute to the beneficiaries the trust.
No equitable proprietary rights.
Beneficiary’s Personal rights in a fixed trust?
They have the right to compel the proper administration of the trust by the trustees.
They also have the right to be informed of their entitlement under the trust once their interest is vested.,
Beneficiary’s Personal rights in a discretionary trust?
As they do not have proprietary interest in the fund, they can enforce the trust by asking the court to ensure discretion is exercised but have no right to request it is done in a particular way.
Once discretion is done, then the beneficiaries have the right to be informed of their entitlements.
They can also sue the trustees for breach like in a fixed trust. and require them to personally compensate the trust fund losses.
Fixed trusts: successive interest trusts?
A trust involving a series of consecutive interests in the same trust property .
Life interest trust:
a beneficiary receives income during their lifetime, with another beneficiary or beneficiaries becoming entitled to the capital (capital beneficiary) after the income beneficiary’s death.
i.e life interest in a house; on trust for A (income beneficiary), remainder to B (capital beneficiary)
Different kinds of Power of appointment?
- Fiduciary power of appointment: a power of appointment given to a trustee; does not need to excersise it but periodically consider to do so.
- Personal power of appointment: a power of appointment given to someone who is not a trustee - not even required to consider it.
What are vested interests?
A current right to property.
a) vested in possession: a current right to enjoy the property.
b) vested in interest: a current right of future enjoyment of the property.
What are contingent interests?
An interest in the property which is conditional upon the occurrence of an uncertain future event.
the word IF is always included.
They become vested if the condition is met; the beneficiary has no entitlement beforehand.
Capital and income?
Capital is the tree and income is the fruit - a capital asset may produce income
- Sole beneficiary/ absolutely entitled:
same beneficiary would be entitled to the capital and potential income.
-> adult: allowed to receive the income as it arises
-> minor: no income as it arises but can be used for their benefit (power
of maintenance) - Sole beneficiary/ future interest:
The capital interest will carry the the intermediate income - attached to the capital interest.
What is the rule in Saunders v Vautier?
a sole adult beneficiary of sound mind, with a vested interest in the trust property, is entitled to direct the trustees to transfer legal title to them - bringing the trust to an end entirely.
The rules have been extended to apply to trusts with multiple beneficiaries - even in successive interest trusts (in that case unanimity of decision, age and capacity from the beneficiaries is needed)
Can beneficiaries with contingent interests practice Saunders v Vautier?
They may only exercise these rights if they act together with all the other persons who share a beneficial interest in the property.
BUT! they must all be over 18, of sound mind and agree to collapse the turst.
The beneficiaries will be treated as a single object in whom the interest subject to the discretion or power is vested.
