Statutory power of advancement Flashcards
What is the purpose of the power of advancement?
A B who expects to receive capital from a trust at a future date may wish to receive their capital before it vests in possession
This is the power to use capital for the advancement or benefit of a beneficiary before the beneficiary becomes absolutely entitled to the property
When is the statutory power of advancement avaialble?
may be used by adult and minor beneficiaries
applies to both vested and contingent interests
can be modified or excluded by the TI
How much capital can be paid
Up to 100% of a Bs prospective entitlement to the capital
Can be used even if Bs do not have saunders v vaultier rights
Trustees have NO obligation to distribute capital if a request is made to use their power of advancement - trustees have a dispositive discretion and not a duty
If trust was created before 1 Oct 2014 - the max cap is 50%n of prospective share capital
What is the meaning of advancement?
provide for an immediate financial benefit for a beneficiary, such as to avoid inheritance tax liability - so any use of money that will improve the material situation of the beneficiary.
Can include the improvement of the B’s moral wellbeing by giving money for charitable purposes but to the extent that B would have otherwise used their own resources for such purposes.
To whom should the capital be paid?
If b is an adult = directly to them and ensure it has been used for the requested purpose
T can also use the capital to purchase an asset or services on B’s behalf.
If B is a minor = T cannot pay capital to them as cannot give good receipt. Should be paid to the child’s parent or guardian or directly to the provider for the good or service
What is the trustee duty to ensure the capital is used for the correct purpose?
If the money is not used for the correct purpose T cannot pay more money to B but can pay money to a third party for the advancement of the beneficiary instead.
What if there are other beneficiaries with a prior interest?
The power in that case, can only be exercised with the written consent of those beneficiaries
Consent of a B with a subsequent interest is not required
Consent can only be provided by beneficiaries who are of full age and sound mind.
Why must trustees that made advance payments bring them into account and what does this mean?
Any payment made must be brought into account when the B becomes absolutely entitled. Amount that the beneficiary will receive when their interest vests will be reduced proportionately to reflect the proportion of the capital that they already received.
What choice do trustees have when bringing payment into account?
Treating the share advanced as a proportionate share of the overall trust value
or
its strict money value
