Fixed And Discretionary Trusts

Question 1

What is a fixed trust?

Answer 1

Where trustees have no discretion in relation to the distribution of the trust property, they must distribute as directed by the settlor AND can have one or more beneficiaries

Question 2

Example of a fixed trust - sole beneficiary

Answer 2

-Where the trustee holds the entire trust property for one beneficiary
The trustee has the legal right to deal with the trust property as owner
(Must exercise the right for the beneficiary)

• beneficiary has personal rights against the trustee & can sue to enforce them
• they also have an equitable proprietary interest in the trust property

Question 3

Example of a fixed trust - beneficiaries with fixed shares

Answer 3

-Where the trust property is held for A and B in equal shares
Fixed trust as the beneficial entitlement is tied by the settler + trustees have no discretion as to how the trust property is distributed
-Both beneficiaries have proprietary and personal rights against the trustee
- together they’re entitled to the entire beneficial interest ( separately each entitled to 50% of the share - of both capital and income)

Question 4

What is a successive interest trust?

Answer 4

• A type of fixed trust
• gives some beneficiaries a right to income, and others a right to capital
• trust involving a series of consecutive interests in the same trust property