The Role of Maintenance and Advancement in a Will

Introduction

Maintenance and advancement

When writing a Will it is important to decide who your trustees are going to be.

Trustees have a variety of powers, for example the power of sale, power to maintain minors and to advance capital.

One of the powers that they have is called Power of Maintenance which is provided in the Trustee Act 1925 ss31 and 32. In order for the statute to apply there should be no contrary intention expressed in the Will.

At this point is significant to explain the difference between the beneficiary’s right to the income and to the capital of a trust.

The income deriving from a trust is a life interest arising from the trust property, while the capital is the beneficiary’s interest in the balance.

The capital is the property subject to the trust, such as money or land. On the other hand, income is the money o property generated by the capital, for example, the rent of a property or interests from shares or investments.

If nothing is expressly stated on the trust with respect to maintenance/advancement, then the statutory provisions apply.

S31 of the Trustees Act 1925 – Powers of Maintenance (Income)

This section is applied for the payment of income generated by the trustee property.
The trustee has discretionary power to follow this rule, which means that they are not forced under any law to pay out income or capital unless they deem appropriate to do so.
If the trustee has any doubt about paying out, it is always advisable not to as the trustees may be liable of breach of trust and may be held accountable for any money spent from the trust.

The power to apply for the income for maintenance is a conscious exercise of discretion. The power cannot be used blindly as the trustee has an obligation to investigate, and use their discretion. Therefore if for example the beneficiary asks the trustee for the income, the trustee must use their discretion and cannot simply pay only based on the request.

Any income not spend during one year usually goes to add up to what is called accumulations.

The use of the income needs to be used primary to benefit the beneficiary.

Other accumulations follow the capital which means that the beneficiary is not entitled to them and the trustee’s discretion to appoint them to the beneficiary lasts only until the beneficiary reaches 18 years old.

The beneficiary does not lose the accumulations deriving from the trust but they simply become part of the capital.

Trustees use their power to pay income or apply capital for the beneficiary.

A trustee can as well create a new trust for the beneficiary which is called a settled advance.

The power of advancement arises by section 32 of the Trustee Act 1925.

This power is subject to four restrictions:

-Power can be exercised only in favour of a beneficiary who has an interest in the capital.

-If the trust has been created before 1 October 2014 then it applies to half of a beneficiary’s interest in the trust. This section has subsequently been repealed and therefore it applies to trust created only before or on 1 October 2014.

-Any beneficiary with a prior interest must consent to the exercise of the power.

-Advances must be taken into account when the beneficiary who receives them later become entitled to the capital.

Martina Acciaro
LLB (International Law)

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