Trustee Powers: Maintenance and Advancement

This set of vocabulary flashcards covers core legal principles regarding trustees' statutory powers of maintenance (income) and advancement (capital) under the Trustee Act 1925.

Trustee Act 1925 (TA 1925)

The legislation that provides trustees with statutory powers to pay income or capital to beneficiaries in the absence of express provisions in the declaration of trust.

Income

A return generated on a regular basis from capital, such as dividends on shares, interest from bank accounts, or rent from land.

Capital

The underlying trust property itself which generates income returns.

Section 31 TA 1925

The statutory provision giving trustees the power to apply trust income for the maintenance, education, or benefit of a beneficiary under the age of $18$ years.

Infant Beneficiary

A beneficiary under the age of $18$ years, also known as a minor, who cannot provide trustees with a legally valid good receipt.

Prior Interest

A beneficial interest that must be respected before income or capital can be applied to a secondary beneficiary, such as a life tenant's right to income.

Life Tenant

A beneficiary who has a right to the trust income for the duration of their lifetime.

Good Receipt

A legal discharge of a trustee's liability for a payment; minors cannot provide this, so trustees must pay parents, guardians, or service providers instead.

Accumulation

The process of investing trust income not currently used for a minor's benefit to be transferred later with the trust capital.

Adult Contingent Beneficiary

A beneficiary aged $18$ or older whose interest has not yet vested; under s 31 TA 1925, they are entitled to receive trust income as it arises.

Section 32 TA 1925

The statutory provision giving trustees the discretionary power to pay or apply trust capital early for a beneficiary's advancement or benefit.

Advancement or Benefit

A broad legal standard for capital distribution that includes any use of money improving the material situation of the beneficiary, excluding items for mere pleasure or hobbies.

Statutory Limit for Capital (Post-October 2014)

For trusts created after $1$ October $2014$, trustees may advance up to the full value ($100\%$) of the beneficiary's presumptive share.

Statutory Limit for Capital (Pre-October 2014)

For trusts created on or before $1$ October $2014$, trustees are limited to advancing no more than one-half ($50\%$) of the beneficiary's presumptive share.

Hotchpot Rules

Accounting rules requiring that any early advancement of trust capital be deducted from the beneficiary's share when they finally become entitled to the trust property.

Written Consent (s 32)

A requirement that an adult beneficiary with a prior interest (like a life tenant) must provide in writing before the trustees can advance capital to a remainderman.

Vested Interest

A right to trust property that is certain and not dependent on the occurrence of a future event or condition.

Remainder

An interest in a trust that becomes possessory only after a prior interest, such as a life estate, has ended.