Trustees’ statutory power of advancement & Maintenance-FS Flashcards
(19 cards)
What is the trustee’s power of advancement and where is it found?
Only beneficiaries who are entitled to the capital of the trust—either absolutely or contingently—are eligible. Life tenants, who are only entitled to income, cannot request an advancement.
Can trustees be forced by a beneficiary to make an advancement under Section 32?
No. The power is discretionary and trustees cannot be compelled by beneficiaries to exercise it.
If a beneficiary is under 18, to whom must the advancement be paid?
It must be paid to a third party, not directly to the beneficiary, because someone under 18 cannot give a valid receipt for trust funds.
What condition must be met for the advancement to be valid?
The advancement must be for the benefit of the beneficiary, meaning it must improve their material situation.
What duty do trustees have regarding the use of the funds advanced?
Trustees must ensure that the purpose of the advancement is genuine and that the funds are used accordingly, for example, confirming that money claimed for education is actually spent on that
What must happen when a beneficiary becomes absolutely entitled to the trust capital after receiving an advancement?
The beneficiary must bring the advancement into account, i.e., account for what portion of their capital entitlement has already been used.
What must happen if a life tenant exists and capital is to be advanced?
The life tenant must consent in writing, and they must be an adult, since their income rights may be reduced by the advancement.
What is the maximum amount trustees can advance under a trust created before 1 October 2014?
Trustees can only advance up to half of the beneficiary’s capital entitlement.
How did the Inheritance and Trustees’ Powers Act affect advancements for trusts created after 1 October 2014?
Trustees are allowed to advance up to 100% of the beneficiary’s capital entitlement, subject to the trustees’ discretion and other legal requirements.
What statutory provision grants trustees the power of maintenance?
Section 31 of the Trustee Act 1925 provides trustees with the power to apply income for the maintenance, education, or benefit of an infant beneficiary.
Who qualifies as an “infant” under the trustee’s power of maintenance?
An infant includes any person under the age of 18.
Can trustees use income for the maintenance of a minor if a life tenant is entitled to it?
No. If there is a life tenant, they are entitled to all trust income, and the remaindermen (minors) cannot benefit from it under Section 31.
How must trustees provide maintenance funds to a minor beneficiary?
Trustees must pay the maintenance funds to a reliable third party, such as a parent or guardian, not directly to the minor.
Can a minor beneficiary compel trustees to provide maintenance?
No. While a beneficiary is a minor, the power of maintenance is discretionary, and the trustees cannot be forced to use it.
What happens under Section 31 when a beneficiary reaches the age of 18?
The beneficiary becomes entitled to the income and may compel the trustees to pay it to them directly.
How does the Inheritance and Trustees’ Powers Act 2014 affect trustees’ discretion over income?
Under Section 8 of the 2014 Act, trustees may pay or apply the whole or any part of the trust income for the benefit of the minor as they see fit.
What is the key difference between the power of maintenance and the power of advancement regarding entitlement?
The power of maintenance applies to income and only to minors, while the power of advancement relates to capital and can apply to both absolute and contingent beneficiaries.
What must trustees consider when applying trust income for a minor’s maintenance?
They must ensure the income is applied for the benefit, education, or general welfare of the minor and may exercise this at their discretion.
What happens if a trust beneficiary turns 18 and has a vested interest in the income?
The trustees are obligated to begin paying the income to the beneficiary directly under Section 31(2).
