Beneficiaries
Beneficiaries must be able to be identified either by name or by class e.g. my children. Often they are named although mention by class increases flexibility of the trust. If the children are named and an extra child is then born, that extra child will not be a beneficiary under the trust until the trust is amended. If the trust was for my children then no amendment would be required.
Types of beneficial trust
A beneficiary can have,
- An absolute interest,
- A life interest (income from the property for the period of their lives),
- A life tenant (such as tenancy of a property),
- A reversionary interest (has interest in the property only after a ‘life interest’ beneficiary dies).
- A contingent interest (one that is subject to a specific event). ‘A’ holds a life interest with contingent interest going to ‘B’ but if ‘B’ dies during ‘A’s life, then ‘A’ has then an absolute interest.
Beneficiaries can be sole beneficiaries or joint beneficiaries.
Enforcing a trust
The general rule is that beneficiaries can not exercise control of the trustees during the currency of the trust. The trustee is bound by the trust wording and rules of equity but personal judgement can be used in exercising powers and duties. A trustee does not always have to consult beneficiaries and comply with their wishes.
Beneficiaries do have some rights and remedies to make certain that the trust is properly administered. They can insist on the accounts being audited and can view the accounts. A beneficiary can go to the courts to obtain a determination to a specific question or for general directions on the administration of the trust.
In the case of Saunders v Vautier (1841) all the beneficiaries were known, with no likelihood of further beneficiaries being found, an all were sane and of age. All beneficiaries joined together to have the trust wound up and themselves paid out in full.
If a trustee acts fraudulently or in breach of the trust then they are liable to the beneficiary for any loss.
Trusts including life insurance policies
If the trust includes a life insurance policy then it may contain some of the following clauses and conditions.
- a covenant by the settler to pay premiums;
- a covenant by the settler to restore the policy if it becomes void;
- a covenant by the settler to revive, or effect, a new life insurance policy if the original policy lapses;
- a power for the trustees to pay premiums out of the trust property;
- a power for the trustees to borrow to pay life insurance premiums;
- powers for the trustees to surrender the policy, to convert it, or to exercise any option in it;
- A wide power for the trustees to deal with the policy in any manner they think fit.