Trustee Powers: Maintenance and Advancement

Question 1

When can the statutory rules in relation to maintenance and advancement be overriden?

Answer 1

If the settlor includes express provisions in the declaration of trust - they may provide or exclude these powers

Question 2

Maintenance is a power to provide income. What does income mean?

Answer 2

Income means a regular payment stream generated from underlying asset (like interest from a bank account or dividends on shares or rent paid from land)

Question 3

When can trustees provide income to beneficiaries?

Answer 3

Trustees have the power to use income to pay for the maintenance, education and benefit of under-18 beneficiaries, so long as:

• There is no contrary provision in the declaration of trust
• The beneficiary in question has an interest in the trust income; and
• There is no prior interest to income (like a life tenant)

Question 4

Who is paid the income when the beneficiary is under-18?

Answer 4

Trustees must not pay income directly to under-18 beneficiaries, because they cannot give ‘good receipt’ (cannot discharge trustees of their duties)

Give money to beneficiaries’ parents or provider of maintenance, education or benefit

Question 5

The trustees cannot be compelled to give income to someone on behalf of an under-18 beneficiary. What is the position for an adult beneficiary?

Answer 5

Adult contingent beneficiaries, however, are entitled to income as of right

From the age of 18 until their interest vests, the beneficiary must receive income, unless there is a prior life tenant

Question 6

Advancement is a power to provide capital. What does capital mean?

Answer 6

Capital refers to the underlying trust property itself

Question 7

When can trustees advance capital early?

Answer 7

• There is no contrary provision in the trust deed
• The beneficiary must have an interest in capital (life tenants do not + only have an interest in income, so cannot have capital advanced to them) - Beneficiary with contingent interest in capital
• The payment must be for the beneficiary’s advancement or benefit, meaning the money must improve the material situation of the beneficiary, not someone else
• The payment must not exceed the beneficiary’s share

i) Two beneficiaries sharing equally; only 50% can go to each in this way

ii) For trusts predating October 2014, only half of a beneficiary’s share can be advanced to them, not the whole share as is currently possible - Note that trusts within a will are deemed to be created on death

• There must be written consent from any life tenant – safeguards the life tenant’s interest

Question 8

Other rules about the exercise of advancement

Answer 8

Trustees cannot be compelled to use it

Trustees must not pay the capital directly to under-18 beneficiaries, so must pay to parents or relevant third party