Term
| Saunders v Vautier [1841] |
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Definition
Richard Wright left his stock to be held on trust for Daniel Vautier.
The income generated from the stock was to be accumulated and this income together with the stock itself was to be transferred to Vautier as absolute owner when he was 25
When Vautier was 21 (the age of majority at the time) he applied to receive the stock and the income
The trustee, Saunders, contested this, stating that Vautier would only be entitled to the ‘property’ according to the terms of the trust
It was held that Vautier would be entitled to the ‘property’ as soon as he was an adult (21) and of full mental capacity
Ratio decidendi = Once the beneficiary is of full age and capacity the terms of the trust should be secondary to the law’s treatment of people as autonomous individuals. The law of Trusts should not, therefore, treat sane adults as if they were children.... the beneficiary has an ‘absolute indefeasible interest in the legacy’ |
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Term
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Definition
Expanded the rule in Saunders v Vautier to apply to trusts where there are multiple beneficiaries
Provided that all of the beneficiaries are in agreement, and they are all sui juris, the trust can be collapsed |
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Term
| What does a ‘life interest’ provide the beneficiary with? (Life tenant) |
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Definition
The right to income arising from the trust property, and after the beneficiary with the life interest dies, the property and its income transfers to the remainderman
On trust for A for life, remainder to B absolutely |
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Term
| If a beneficiary has a vested interest, what does this mean? |
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Definition
| The beneficiary has an unconditional interest |
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Term
| If a beneficiary has a contingent interest, what does this mean? |
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Definition
The interest is subject to a condition... the beneficiary must ‘do’ something in order to receive the interest
Refrain from drug taking
Outlive a certain person
Go to university etc... |
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Term
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Definition
| The beneficiaries are fixed, the quantities they receive are fixed, and once the beneficiary is entitled, there is no discretion as to how much the trustee can give to them |
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Term
| What are the different ways in which a discretionary trust can be discretionary? |
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Definition
Whether to pay out the income
If so, to whom (closed list/open list)
How much to each beneficiary |
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Term
| What is an exhaustive discretionary trust? |
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Definition
If the trustees are obliged to pay out all of the income each year
Only have two discretions with regards to paying out
To whom
In what amounts |
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Term
| What is a non-exhaustive discretionary trust? |
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Definition
The trustee has the power to accumulate the income – does not have to pay it out periodically
Trustee has three discretions:
To whom
In what amounts
Whether to accumulate the income, or pay it out |
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Term
| What is a protective trust? |
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Definition
The principal purpose of a protective trust is to protect the trust fund and the principal beneficiary... used in situations where the settlor fears that the principal beneficiary may go bankrupt, or be a wastrel
The principal beneficiary/ies initially receive a fixed life interest
If the principal beneficiary/ies goes bankrupt or attempts to dispose of his life interest, in whole or in part, the life interest automatically ends and is replace by a discretionary trust of the income, for the rest of the principal beneficiary/ies life |
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Term
| What is the different between a ‘power of appointment’ and a trust? |
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Definition
The exercise of a power is optional, if the person with the duty under a power decides not to exercise it, there is no legal issue with the person. In creating a power, there will be a ‘gift-over’ and if the power is not exercised, the gift-over will activate in default of the power
The court will enforce a trust, but the court will never compel the exercise of a power
The objects of a fixed trust must be certain, the objects of a power may be more widely and loosely described
Saunders v Vautier cannot be used to collapse a power |
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