Statutory maintenance: contingent beneficiary entitled to income at 18 (TA 1925 s.31)
Harriet Quaye died in 2020. Her will left her residuary estate on trust for her grandson Zane 'if he attains the age of 25'. No one has a prior interest. The gift carries the intermediate income, and the will does not exclude or vary section 31 of the Trustee Act 1925. While Zane was a minor the trustees used part of the income for his school fees and accumulated the rest. Zane has just turned 18.
What is the trustees' position regarding the income of the trust fund from now on?
Choose one answer to see the reasoning.
Worked answer
Correct answer E: They must now pay Zane the income until he reaches 25 or his interest fails, though his interest in capital is still contingent.
THE RULE TO REMEMBER
Under TA 1925 s.31(1)(ii), a beneficiary with a contingent interest that carries intermediate income becomes entitled to the income at 18, until the interest vests or fails.
Statutory maintenance: contingent beneficiary entitled to income at 18 (TA 1925 s.31)
Section 31(1)(i) of the Trustee Act 1925 gives trustees a discretion during a beneficiary's minority to apply income for his maintenance, education or benefit. Any income not applied must be accumulated under section 31(2). Once the beneficiary reaches 18, section 31(1)(ii) applies. If he has not then got a vested interest in the income, the trustees 'shall thenceforth pay the income' to him until he attains a vested interest, dies, or his interest fails. Under section 31(3) this applies to a contingent interest only if the gift carries the intermediate income, which the facts confirm. Zane's interest in capital is still contingent on reaching 25, but he is 18, so the trustees' discretion has ended. They must now pay him the income as of right. The amendments made by the Inheritance and Trustees' Powers Act 2014 changed the trustees' discretion during minority, not this rule at 18. The capital vests only if Zane reaches 25.
Why A is wrong: Compulsory accumulation under s.31(2) applies only during minority; from 18 the income must be paid to Zane.
Why B is wrong: The discretion in s.31(1)(i) lasts only during infancy; at 18 the duty in s.31(1)(ii) takes over.
Why C is wrong: Zane's entitlement to capital remains contingent on reaching 25; s.31 deals with income only.
Why D is wrong: The age of majority is 18, and from 18 income is paid to the beneficiary himself.
A little more practice done.
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