Dispositive powers: Power of advancement Flashcards
What is the power of advancement?
Trustees have the power to use capital for the ‘advancement or benefit’ of a beneficiary before the beneficiary becomes absolutely entitled to the property.
What do we mean by advancement?
Any use of the money which will improve the material situation of the beneficiary.
PS! can also include the improvement of the beneficiary’s moral well-being by giving the money for charitable purposes, but only to the extent that the beneficiary would have otherwise used their own resources for such purposes.
When can the statutory power of advancement be used?
- May be used by both adult and minor beneficiaries.
- Applies to both vested and contingent interests.
- Can be modified or excluded by the trust instrument.
How much capital can be paid using the power of advancement?
Up to 100% of a beneficiary’s prospective entitlement to the capital (even if they have a contingent interest).
Payment must be brought into account (reduced) when the beneficiary becomes absolutely entitled.
PS! Trustees have a choice between treating the share advanced as a proportionate share of the overall trust value or its strict monetary value.
What is the difference between the power of advancement and the rules in Saunders v Vautier?
Unlike where a beneficiary is exercising their Saunders v Vautier rights, the trustees have no obligation to distribute capital if a request is made to use their power of advancement.
The trustees have a dispositive discretion, not a duty.
Who does the capital paid go to?
Adults: Straight to them or the trustees can purchase the asset on the beneficiary’s behalf.
Minors: either to the child’s parents or legal guardian or directly to the provider of the goods or services that are being acquired on behalf of the beneficiary.
Do we need the consent of other beneficiaries with prior interest?
The power may only be exercised with the written consent of beneficiaries with a prior interest (order in which the trust is enjoyed).
PS! The consent of a beneficiary with a subsequent interest, such as the recipient of a
gift-over, is not required.
