Can I Force My Trustees To Make Payment To Me As A Beneficiary Before I Am Due To Inherit?

Trusts are set up in a way that means at the time of creation, beneficiaries do not automatically take their respective share. This is almost always the case as if it were not, there would be no reason to create a Trust, other than for tax planning purposes.

Early Trust payments to beneficiaries

It is often the case that beneficiaries will require funds from the Trust before they are due to inherit them. Further, when a beneficiary is aware of the Trust they tend to seek funds before they become due. This is typical for Trusts where the beneficiaries are minors or when beneficiaries are set to inherit at a specific age/event.

Whilst the Trust may set strict terms as to early advancement, the Trustee Act 1925 (“the Act”) grants Trustees the discretion to make advancements to beneficiaries. Whilst the Trustees have such rights, it should be noted that this is at their discretion and not enforceable by the beneficiaries.

Discretionary powers of Trustees

S.31 of the Act gives Trustees discretionary power to apply income for the maintenance, education, and benefit of a beneficiary. This means that any income produced by that beneficiary’s respective share can be applied to a beneficiary if the Trustees think it would be fit to do so.

Case law has shown that Trustees generally have a wide scope of discretion as to what they consider to be within the best interests of a beneficiary. Depending on the Trust assets, however, the level of income may not meet the needs of the beneficiary and further advancement may be required.

S.32 gives Trustees discretion to advance capital in the Trust to a beneficiary. This power can be used whenever the Trustees think fit and therefore allows for larger advancements to be made to a beneficiary.

The power is such that Trustees can advance up to half of a beneficiary’s presumptive share within a Trust, and this should not affect any other beneficiary’s presumptive share. There are of course practical implications to consider when making a decision, such as whether payments are possible depending on the assets within the Trust and whether they are liquid/accessible funds.

Although the Trustees have the power to apply income and make an advancement, it is only discretionary and not something which a beneficiary can enforce. Whilst a beneficiary can make a request for such provisions to be used, the final decision ultimately lies with the Trustee. This can often create conflicts between the beneficiaries and Trustees and can result in beneficiaries taking action to challenge a Trustee’s decision.

Beneficiaries challenging a Trustee’s decision

It can be possible to challenge a Trustee’s decision on the basis a Trustee is not acting within their duties of being a Trustee, as defined in the Trustee Act 2000.

If successful, this will often result in the Trustee(s) being ordered to retire as Trustee(s), but it may also result in such agreement being made as to the application of Trust funds to a beneficiary.

For cases where a Trustee appears to act in an un-explainable, stubborn manner, it is advised that the Trustees are changed. Trustees will generally agree to be replaced providing appropriate replacements are identified and suitable indemnities are provided. If Trustees disagree, this can again be challenged.