Trustees: Power of Maintenance Flashcards
Under s31 of the Trustee Act 1925, trustees may apply trust income for what purpose in relation to a minor beneficiary?
A. For their maintenance, education, or benefit during their minority
B. For any beneficiary, regardless of age or interest
C. Only after the beneficiary turns 18
D. To accumulate income without any exceptions
A. For their maintenance, education, or benefit during their minority
Explanation:
s31 TA 1925 allows trustees to apply income for a minor’s maintenance, education, or benefit unless excluded by the trust or a prior interest exists.
Amy is 14 and is entitled to a vested interest in capital under a trust. The trustees decide to pay for her private tuition using trust income. Is this an appropriate exercise of their powers?
A. No, trustees cannot spend income on educational purposes
B. Yes, trustees may apply trust income for Amy’s benefit under s31 TA 1925
C. No, they must wait until she reaches 18
D. Yes, but only with a court order
B. Yes, trustees may apply trust income for Amy’s benefit under s31 TA 1925
Explanation:
Amy is under 18 and has a vested interest. Trustees are permitted to use income for her education under the statutory power.
Tom, a trustee, automatically pays trust income to a minor beneficiary’s parent every month without reviewing the child’s actual needs or trust terms. Which is correct?
A. Tom is properly exercising the statutory power of maintenance
B. Tom must obtain the beneficiary’s consent
C. Tom can only apply accumulated income, not current income
D. Tom is likely breaching his fiduciary duty by failing to consider the beneficiary’s actual needs
D. Tom is likely breaching his fiduciary duty by failing to consider the beneficiary’s actual needs
Explanation:
Trustees must consider the needs of the minor and exercise the power actively. Automatic payments without review are improper (Wilson v Turner).
If trust income is not applied for a minor’s benefit under s31, what happens to that income?
A. It must be given to the minor’s parent
B. It is automatically paid out when the minor turns 16
C. It is accumulated and added to capital
D. It is forfeited by the minor
C. It is accumulated and added to capital
Explanation:
Unapplied income during the beneficiary’s minority is accumulated and added to capital unless the trust says otherwise.
Lucy is 17 and entitled to a contingent interest in capital if she reaches 25. The trust is silent on income. The trustees want to pay rent for her university accommodation using trust income. Can they do so?
A. Yes, because Lucy’s interest carries the intermediate income and she is a minor
B. No, because she is not yet 18
C. No, because the trust must be wound up
D. Yes, but only if she has a vested interest
A. Yes, because Lucy’s interest carries the intermediate income and she is a minor
Explanation:
Where a minor has a contingent interest that carries income, trustees may apply that income for their maintenance/education under s31 TA 1925
