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Chapter

Cover Equity & Trusts Law Directions

13. Maintenance and advancement  

Without assuming prior legal knowledge, books in the Directions series introduce and guide readers through key points of law and legal debate. Questions, diagrams and exercises help readers to engage fully with each subject and check their understanding as they progress. Under the Trustee Act 1925, trustees have the power to make payments out of the trust income for the maintenance of infant beneficiaries, as well as the power to make payments out of trust capital for the advancement and benefit of both infant and adult beneficiaries. However, the express terms of the trust instrument can exclude or modify these provisions. This chapter deals with maintenance and advancement of trust beneficiaries. It examines the extent of the statutory powers of maintenance and advancement, how the statutory powers are excluded or modified by the express terms of the settlement and a valid exercise of the powers of maintenance and advancement. The chapter also considers maintenance with respect to gifts carrying intermediate income, class gifts, tax considerations, perpetuities, and maintenance out of capital money, along with the meaning of ‘benefit’, exercise of discretion to make an advancement and contrary intention in the trust instrument.

Chapter

Cover Equity & Trusts Law Directions

14. Investment  

Without assuming prior legal knowledge, books in the Directions series introduce and guide readers through key points of law and legal debate. Questions, diagrams and exercises help readers to engage fully with each subject and check their understanding as they progress. Part II of the Trustee Act 2000 gives every trustee the power to make any kind of investment as long as he is absolutely entitled to the assets of the trust, a power that permits trustees to hold investments jointly or in common with other persons. There are no unauthorised types of investment, but it is important to know whether the type of investment chosen was appropriate to the trust on the basis of the ‘standard investment criteria’. This chapter examines the types of investment permitted by the general law, a breach of the duty to invest with appropriate care, the significance of modern portfolio theory to trustee investments and the impact of the Trustee Act 2000 upon trustee investments. It also looks at the historical need for income production and discusses capital gains as investment returns, the standard investment criteria, the need for trustees to obtain and consider proper advice about investments, particular types of investment and investment policy.

Chapter

Cover Trusts & Equity

6. Formality, perpetuity, and illegality: trust creation and public policy I  

Trust property apparently belongs to the person who is not the true owner despite having all the forms and powers of ownership. Thus, a trust creates an illusion of ownership that may prejudice trade creditors when the trustee becomes insolvent and deceive the state’s tax collection agencies. However, there are a number of safeguards designed to prevent the undesirable creation and operation of trusts. For example, the disposition of equitable interests under trusts must be made in writing and the creation of trusts of land must be evidenced in writing. This chapter discusses the ways in which the creation of trusts is influenced by special considerations of public policy, focusing on formality, perpetuity, and illegality. It also considers rules against perpetuities—the rule against remoteness of vesting, the rule against inalienability of capital, and the rule against accumulation of income—and finally, looks at the Perpetuities and Accumulations Act 2009.

Chapter

Cover Trusts & Equity

6. Formality, perpetuity, and illegality: trust creation and public policy I  

Trust property apparently belongs to the person who is not the true owner despite having all the forms and powers of ownership. Thus, a trust creates an illusion of ownership that may prejudice trade creditors when the trustee becomes insolvent and deceive the state’s tax collection agencies. However, there are a number of safeguards designed to prevent the undesirable creation and operation of trusts. For example, the disposition of equitable interests under trusts must be made in writing and the creation of trusts of land must be evidenced in writing. This chapter discusses the ways in which the creation of trusts is influenced by special considerations of public policy, focusing on formality, perpetuity, and illegality. It also considers rules against perpetuities—the rule against remoteness of vesting, the rule against inalienability of capital, and the rule against accumulation of income—and finally, looks at the Perpetuities and Accumulations Act 2009.

Chapter

Cover Equity & Trusts Law Directions

6. Public policy limitations on the formation of trusts  

Without assuming prior legal knowledge, books in the Directions series introduce and guide readers through key points of law and legal debate. Questions, diagrams and exercises help readers to engage fully with each subject and check their understanding as they progress. If a person sets up a trust to protect himself from creditors in case of insolvency, the trust will be void. Public policy does not permit private trusts to defeat public interests. In addition to a trust prejudicing one’s creditors, other examples of trusts that are void on grounds of public policy are trusts that promote racial or sexual prejudice, trusts which tie up wealth for too long, trusts that restrain marriage and ‘sham’ trusts. This chapter, which focuses on public policy limitations on the formation of trusts, first outlines the rules against perpetuities, the rule against remoteness of vesting, the rule against inalienability of capital and the rules against perpetuity and charities. It then considers private trusts, a breach of the rules against perpetuity and excessive accumulation of income, situations in which a trust designed to shield assets from creditors will and will not be void, the Perpetuities and Accumulations Act 1964, proposals for reform of the rules against perpetuities and gifts subject to conditions.

Chapter

Cover Trusts & Equity

9. Flexibility of benefit  

According to the so-called ‘rule in Saunders v. Vautier’, the beneficiaries of an expressly created private trust may terminate the trust if they are in unanimous agreement and are all competent adults, and are, between them, absolutely entitled to the trust property. This chapter examines the issue of ‘flexibility of benefit’, the extent to which beneficiaries may be able to take benefits under a trust despite limitations on their beneficial ownership, as well as the extent to which limitations on their beneficial ownership may be varied or entirely removed. It shows that under the Trustee Act 1925, trustees have a discretionary power—known as ‘the power of maintenance’—to apply income for the benefit of infant beneficiaries and a similar discretionary power, termed ‘the power of advancement’, to apply capital for the benefit of a beneficiary (infant or adult) out of his/her anticipated entitlement to the trust fund.

Book

Cover Trusts & Equity
This book provides a detailed and conceptual analysis of trusts and equity; concentrating on those areas of the subject that are most relevant in the contemporary arena, such as the commercial context. It utilizes expertise in teaching, writing, and researching to enliven the text with helpful analogies and memorable references to extra-legal sources such as history, literature, and film. In this way, the book also stimulates students to engage critically with concepts. This new edition is not merely updated but fully revised to include a new layout and a number of features designed to make the text even more accessible to student readers, one of which is a new context feature at the start of each chapter. This new revised edition also includes the latest legal developments, including decisions of the Supreme Court on dishonesty in relation to the civil liability of strangers to trusts (Ivey v. Genting Casinos UK Ltd (t/a Crockfords Club (2017)) and on equitable relief against forfeiture (The Manchester Ship Canal Company Ltd v. Vauxhall Motors Ltd (2019)). A great many new cases in the Court of Appeal and the High Court have been added, including twenty or more in 2019 alone. Other recent devlepments including law commission reports and academic commentary are also included. Further reading and discussion of anticipated reforms has been updated throughout in light of the latest legal developments.

Chapter

Cover Trusts & Equity

9. Flexibility of benefit  

According to the so-called ‘rule in Saunders v. Vautier’, the beneficiaries of an expressly created private trust may terminate the trust if they are in unanimous agreement and are all competent adults, and are, between them, absolutely entitled to the trust property. This chapter examines the issue of ‘flexibility of benefit’, the extent to which beneficiaries may be able to take benefits under a trust despite limitations on their beneficial ownership, as well as the extent to which limitations on their beneficial ownership may be varied or entirely removed. It shows that under the Trustee Act 1925, trustees have a discretionary power—known as ‘the power of maintenance’—to apply income for the benefit of infant beneficiaries and a similar discretionary power, termed ‘the power of advancement’, to apply capital for the benefit of a beneficiary (infant or adult) out of his/her anticipated entitlement to the trust fund.

Book

Cover Equity & Trusts Law Directions
Without assuming prior legal knowledge, books in the Directions series introduce and guide readers through key points of law and legal debate. Questions, diagrams and exercises help readers to engage fully with each subject and check their understanding as they progress. This book explains the key topics covered on equity and trusts courses. The content of the text is designed to emphasise the relationship between equity, trusts, property, contract and restitution to enable students to map out conceptual connections between related legal ideas. There is also a focus on modern cases in the commercial sphere to reflect the constantly changing and socially significant role of trusts and equity. The book starts by introducing equity and trusts. It then includes a chapter on understanding trusts, and moves on to consider capacity and formality requirements, certainty requirements and the constitution of trusts. Various types of trusts are then examined such as purpose, charitable, and variation trusts. The book then describes issues related to trusteeship. Breach of trust is explained, as is informal trusts of land. There is a chapter on tracing, and then the book concludes by looking at equitable liability of strangers to trust and equitable doctrines and remedies. This new edition includes coverage of significant recent cases, including the Supreme Court decision on interest to be paid by tax authorities on monies owed; the Supreme Court decision on the test of dishonesty applicable to civil matters; the Privy Council decision on the division of investment property acquired by cohabitants; the Court of Appeal decisions on Quistclose trusts; fiduciary duties in arms-length contracts; transactions prejudicing creditors; beneficiary anonymity in variation of trust cases; exemption clauses; discretion exercised beyond trustee’s authority; implications of GDPR for trustee disclosures; trustee personal liability; causation and equitable compensation; statutory relief for a professional trustee’s breach of trust; use of proprietary estoppel to reward work undertaken in farming families; costs of seeking court’s directions; injunctions ordered against persons unknown; equitable jurisdiction to rectify agreements.