Power Of Appropriation Flashcards
Q1. What does Article 27 of the Trusts (Jersey) Law 1984 allow trustees to do regarding a beneficiary’s interest?
A1. It lets trustees appropriate (assign) specific trust property to a beneficiary, in total or partial satisfaction of the beneficiary’s interest, without needing the beneficiary’s consent.
Q2. Why might a trustee use the power of appropriation?
A2. It can effectively transform a limited interest (e.g., life interest) into an absolute interest in a smaller portion of the trust property, or it can help with tax planning by making it clear the beneficiary is not a “settlor” of a new trust.
Q3. What are dispositive powers in a trust context?
A3. They are the powers relating to distribution of trust income or capital to beneficiaries (or purposes). Examples include powers to pay income, advance capital, or add/remove beneficiaries.
Q4. Does the Trusts (Jersey) Law 1984 define a “power of appointment”?
A4. Yes, Article 39 says a trust’s terms may give the trustee (or another person) power to assign trust property to any person, even someone not originally a beneficiary.
Q5. Under Article 38(5), can a trustee give a beneficiary capital before the beneficiary’s interest vests absolutely?
A5. Yes, trustees can advance all or part of the trust property to a beneficiary who has only a future (contingent or vested) interest, provided any person with a prior interest or charge consents.
Q6. How does Article 38(6)–(7) ensure fairness when capital is advanced?
A6. Whatever is advanced:
Counts against the beneficiary’s share in the trust property,
Cannot exceed that share.
Q7. What does Article 38(1) allow regarding accumulation of income?
A7. Subject to Article 15, the trust terms can direct or authorize the trustee to accumulate all or part of the income, and either:
Add it to capital, or
Retain it as income (character as income) for any period.
Q8. When the trust does not require accumulation or distribution of income, what happens?
A8. Under Article 38(2), the income is retained as income in the trust unless a power to accumulate it (or distribute it) is actually exercised.
Q9. Does the 1984 Law itself confer a power to add or remove beneficiaries?
A9. No. The Law only recognizes that such a power can be given by the trust deed. Many discretionary trusts include this power to “add to” or “remove from” the beneficiary class.
Q10. What is a “blind” or “black-hole” trust in this context?
A10. A trust starting with a narrow class (e.g. charities) but containing a power to add further beneficiaries later. The initial named beneficiaries are often never intended to benefit significantly, while the real beneficiaries are added later.
Q11. Can the trust terms require a trustee to get someone else’s consent before exercising a power?
A11. Yes. Article 24(3) explicitly allows a trustee’s power to be conditional on another person’s consent. That person is not thereby deemed a trustee (Article 24(4)).
Q12. Under what circumstances will a defect in exercising a trustee power be “cured” by equity?
A12. Two main instances:
Wrong person signs, but the correct person also signs (unwittingly authorizing it). The court may impute an intention if there’s no contrary evidence.
Lack of formalities, but the power is exercised in favor of persons the appointor has a moral obligation to support, and otherwise the exercise would have been valid.
Q13. What is the default rule for co-trustees when they exercise powers?
A13. They must act unanimously unless the trust deed says a majority can act (Article 22(2)–(3)). A dissenting trustee can have their objection recorded in writing.
Q14. Why can the difference between an “obligation” and a “discretion” matter if trustees can’t agree?
A14. If a require action is truly an obligation, trustees must do it even if not unanimous about discretionary alternatives. If it’s merely discretionary, they can’t exercise it without unanimous agreement – so the obligation effectively prevails.
Q15. What does “benefit” typically include when the trust deed allows discretionary distributions for a beneficiary’s “benefit”?
A15. It is broadly interpreted to include moral (non-financial) benefits, like paying a beneficiary’s legal debts, supporting dependants, or fulfilling charitable obligations on their behalf.
Q16. Summarize how appropriation and advancement powers fit into a trustee’s broader “dispositive powers.”
A16. Both let trustees adjust how property is distributed:
Appropriation (Art 27) assigns specific property to satisfy a beneficiary’s share,
Advancement (Art 38(5)–(7)) allows early capital distributions to beneficiaries with only a future interest.
These are part of the trustee’s discretionary or administrative powers, subject to the trust deed’s terms and other legal constraints.
