Trustees: appointment, duties, powers, and liabilities - Sta...

Learning Outcomes

This article outlines the statutory powers available to trustees under sections 31 and 32 of the Trustee Act 1925, including:

• the structure, scope, and limits of the statutory power of maintenance in s 31, including when a minor has an interest in income and when a trust carries intermediate income;
• how trustees may apply income for a minor’s maintenance, education, or benefit, how surplus income must be accumulated, and how entitlement changes when the beneficiary turns 18;
• the effect of different types of gifts (such as testamentary gifts of property versus contingent pecuniary legacies) on entitlement to intermediate income and the availability of s 31;
• the structure, scope, and limits of the statutory power of advancement in s 32, including the pre‑ and post‑1 October 2014 maximum advancement rules and the ability to advance property as well as cash;
• the requirement for written consent from life tenants or other holders of prior interests where an advancement would prejudice their income rights;
• the bringing-into-account principle on final distribution and how advances are adjusted proportionately against a beneficiary’s ultimate share;
• how the trustees’ fiduciary obligations and statutory duty of care under the Trustee Act 2000 guide the exercise of both powers, including record‑keeping and even‑handed treatment of beneficiaries;
• typical problem‑question scenarios in which these powers arise and key analytical steps for applying the statutory provisions to SQE1-style fact patterns.

SQE1 Syllabus

For SQE1, you are required to understand the practical application of trustees' statutory powers, including when and how trustees can utilise trust income for a beneficiary's maintenance, education, or benefit, and when they can advance capital before a beneficiary becomes absolutely entitled, with a focus on the following syllabus points:

• The scope and conditions for exercising the statutory power of maintenance under s 31 Trustee Act 1925.
• The rules regarding the accumulation of income for minor beneficiaries and the concept of trusts that carry intermediate income.
• The entitlement of adult beneficiaries to income under s 31, including exceptions for contingent pecuniary legacies.
• The scope and conditions for exercising the statutory power of advancement under s 32 Trustee Act 1925.
• The requirement for consent from those with prior interests (life tenants) when exercising the power of advancement.
• The impact of advancements on a beneficiary's final share through bringing-into-account.
• The effect of the Inheritance and Trustees’ Powers Act 2014 on both powers (maintenance and advancement).
• The trustees’ duty of care (Trustee Act 2000) when deciding whether and how to exercise these discretionary powers.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Under s 31 Trustee Act 1925, for which purposes may trustees apply income for a minor beneficiary?
   1. Maintenance only.
   2. Education only.
   3. Benefit only.
   4. Maintenance, education, or benefit.
2. What happens to income accumulated under s 31 Trustee Act 1925 when a beneficiary with a contingent interest in capital reaches 18?
   1. It is paid immediately to the beneficiary.
   2. It is added to the capital of the trust fund.
   3. It continues to be held at the trustees' discretion.
   4. It is paid to the beneficiary's parent or guardian.
3. Under s 32 Trustee Act 1925 (as amended), what is the maximum amount of capital that trustees can advance to a beneficiary with a vested interest in the entire fund?
   1. One-half of their entitlement.
   2. One-third of their entitlement.
   3. The whole of their entitlement.
   4. An amount deemed reasonable by the trustees.
4. When is the consent of a life tenant required for an advancement of capital to a remainderman under s 32 Trustee Act 1925?
   1. Always.
   2. Never.
   3. Only if the life tenant is over 18.
   4. If the advancement prejudices the life tenant's interest.

Introduction

Trustees manage trust assets according to the terms of the trust instrument and general law. While the trust deed may grant specific powers, statute also confers default powers upon trustees to deal with trust income and capital for the benefit of beneficiaries, particularly where beneficiaries are minors or have contingent interests. The two key statutory powers are the power of maintenance (using income) and the power of advancement (using capital). These powers provide flexibility but must be exercised within specific legal constraints and in accordance with the trustees' fiduciary duties and statutory duty of care. The Trustee Act 1925 provides the default regime, significantly modernised by the Inheritance and Trustees’ Powers Act 2014. For maintenance, an essential threshold concept is that the beneficiary must have an interest in income that the trust carries during the relevant period. For advancement, trustees must consider whether the proposed application is for the beneficiary’s advancement or benefit and whether it prejudices any prior life interest, in which case written consent is needed.

Key Term: life tenant
A beneficiary with an interest in possession in the trust income (or use/enjoyment of property) during their lifetime. The life tenant’s interest is prior to any remainderman’s future capital interest.

Key Term: prior interest
An earlier, existing beneficial interest that takes priority over the interests of later beneficiaries. Most commonly, a life tenant’s income interest from the fund, which must not be prejudiced without their written consent when capital is advanced to a remainderman.

Statutory Power of Maintenance (Section 31 Trustee Act 1925)

Section 31 TA 1925 grants trustees the discretionary power to apply trust income for the maintenance, education, or benefit of a beneficiary who is under 18 (a minor) and has an interest in that income. This power applies unless excluded or modified by the trust instrument.

Conditions for Exercise (Maintenance)

The power under s 31 can only be exercised if the beneficiary has an interest (vested or contingent) in the income generated by the trust property. It cannot be used if another beneficiary has a prior right to that income, such as a life tenant who is entitled to receive all the income as it arises. It is also unavailable if the beneficiary is merely an object under a discretionary trust without any automatic entitlement to income; discretionary objects do not have a present proprietary entitlement to income and therefore s 31 does not apply unless the trust deed gives an express maintenance power.

A further threshold is whether the trust “carries the intermediate income” in respect of the gift to the minor. Broadly, testamentary gifts of property (for example, land or shares) to minors—vested or contingent—carry intermediate income, whereas contingent pecuniary legacies (cash payable on a future condition) generally do not.

Key Term: trusts that carry the intermediate income
Trust arrangements where the beneficiary is entitled to the income accrued between the date of the gift and the date when capital vests (for example, contingent gifts of property under a will). By contrast, contingent pecuniary legacies (cash payable on satisfying a condition) usually do not carry intermediate income (see LPA 1925 s 175).

Key Term: Vested Interest
An interest that is unconditional. The beneficiary's right to the property is certain, although enjoyment might be postponed (vested in interest) or immediate (vested in possession).

Key Term: Contingent Interest
An interest that depends on the occurrence of a future uncertain event (a condition precedent), such as attaining a specific age or surviving another person.

Application of Income

Trustees have discretion regarding whether to apply income and how much income to apply for the minor's maintenance, education, or benefit. “Benefit” is interpreted broadly and can include welfare, health, training, extracurricular activities, and reasonable lifestyle costs that support the child’s development. Payments should not be made directly to the minor (who cannot give a valid receipt). Trustees should either pay the supplier directly (e.g., school fees, music lessons) or pay the parent or guardian to be applied for the minor’s benefit. For trusts created on or after 1 October 2014, trustees are not required to take into account the minor’s other resources or the availability of support from those legally bound to maintain the child; the pre-2014 statutory constraints were removed.

Trustees must still act in good faith and even-handedly across beneficiaries and must document decisions consistently with their duty of care under the Trustee Act 2000. Obtaining appropriate advice before funding significant or specialised education or care may be prudent.

Accumulation of Surplus Income

Any income not applied for the minor's maintenance, education, or benefit must be accumulated (invested and added to the capital) during their minority (s 31(2)). Accumulations should themselves be properly invested under the general power of investment and the standard investment criteria in Trustee Act 2000. Trustees can resort to these accumulations in later years of the minority to make payments if needed. The Perpetuities and Accumulations Act 2009 permits accumulation throughout the life of many private trusts, but s 31 provides a specific regime that requires distribution (rather than continued accumulation) when a minor becomes an adult and has the requisite entitlement to intermediate income.

Entitlement at Age 18

The trustees' discretion under s 31 ends when the beneficiary turns 18. The beneficiary's entitlement thereafter depends on the nature of their interest:

• Vested interest in income (e.g., life interest): The beneficiary is entitled to receive all income arising after their 18th birthday, plus any income accumulated during their minority.
• Vested interest in capital and income: The beneficiary is absolutely entitled at 18 and receives the capital along with all accumulated income.
• Contingent interest in capital: The beneficiary is entitled to receive the income arising after their 18th birthday until the contingency is met (or fails). Any income accumulated during their minority is added to the capital and vests only when the contingency is met (s 31(2)(ii)). If the beneficiary dies before the contingency is met, the accumulated income and capital pass according to any gift-over provisions in the trust or, failing that, to the settlor’s estate via a resulting trust.

An important exception: contingent pecuniary legacies (cash payable on meeting a condition) do not carry intermediate income; therefore, after turning 18, the beneficiary is not entitled to interim income unless the trust instrument says otherwise.

Key Term: trusts that carry the intermediate income
Testamentary gifts of property (not cash) typically carry the right to interim income. Contingent cash gifts do not, unless the trust instrument provides otherwise.

Trusts Created Before 1 October 2014

For trusts created before 1 October 2014, the power was more constrained. Trustees could apply income only “as may, in all the circumstances, be reasonable” and had to consider factors like the minor's age, requirements, and other resources available for maintenance or education. The Inheritance and Trustees' Powers Act 2014 replaced this with a broader discretion (“as they shall see fit”) for trusts taking effect on or after 1 October 2014, removing the explicit statutory requirement to consider other funds or persons bound by law to provide for the child and thereby aligning the law more closely with modern practice.

Worked Example 1.1

A trust created in 2016 holds £100,000 for Ben contingent on him reaching age 25. Ben is currently 16. The trust generates £3,000 income annually. Ben's parents ask the trustees to pay £2,000 per year towards Ben's school fees. Can the trustees comply?

Answer:
Yes, the trustees can comply. Ben has a contingent interest that carries the right to intermediate income. Section 31 allows trustees, at their discretion, to apply income for a minor beneficiary's education. Paying school fees falls within this. They should pay the school directly or the parents. The remaining £1,000 income must be accumulated. When Ben turns 18, he becomes entitled to receive the £3,000 annual income directly until he is 25. The accumulated income will be added to the capital.

Worked Example 1.2

A will trust (taking effect on the testator’s death in 2023) leaves “£50,000 to my niece if she attains 25.” The fund produces bank interest before the niece turns 25. The niece is 17 and seeks income under s 31. Is she entitled?

Answer:
No. This is a contingent pecuniary legacy. As a rule, contingent cash gifts do not carry intermediate income. Section 31 does not create an entitlement to interim income for such gifts unless the will specifies otherwise. The accrued interest will be accumulated and added to capital, and the niece will only receive capital if and when she attains 25.

Statutory Power of Advancement (Section 32 Trustee Act 1925)

Section 32 TA 1925 gives trustees the discretionary power to pay or apply trust capital for the advancement or benefit of a beneficiary before the beneficiary becomes absolutely entitled to it under the terms of the trust. Like s 31, this power applies unless varied or excluded by the trust instrument.

Conditions for Exercise (Advancement)

• Interest in Capital: The beneficiary must have an interest (vested or contingent/presumptive) in the capital of the trust fund. A life tenant, who only has an interest in income, cannot be advanced capital under s 32 unless the trust instrument gives a separate power.
• Advancement or Benefit: The payment must be for the beneficiary's “advancement or benefit”. This is interpreted widely to include uses that materially improve the beneficiary’s position (setting up a business, purchasing a property to occupy, education or training expenses, paying professional fees or equipment, or restructuring interests to achieve tax or estate-planning efficiencies).
• Limit on Amount: For trusts created on or after 1 October 2014 (following amendment by the Inheritance and Trustees' Powers Act 2014), trustees can advance up to the whole of the beneficiary's vested or presumptive share, and may apply property (not just cash). For trusts created before that date, the limit was one-half.
• Bringing into Account: Any capital advanced must be brought into account against the beneficiary's share when they ultimately become entitled to the capital. In practice, “bringing-into-account” is done by reference to the proportion of the whole share, not merely historic nominal sums. Trustees should record advances and maintain an auditable trail so that the final calculation on distribution reflects percentage shares fairly.
• Consent of Prior Interests: If paying capital to a beneficiary would prejudice someone with a prior interest (typically a life tenant entitled to income from that capital), that person's written consent must be obtained, provided they are of full age and capacity (s 32(1)(c)). Where there are multiple life tenants or prior interests affected, all relevant consents are needed.

Key Term: Advancement
A payment or application of capital intended to establish a beneficiary in life or make permanent provision for them.

Key Term: Benefit
A broad term covering any use of capital that improves the material situation of the beneficiary, even if not strictly an “advancement” (for example, a strategic resettlement, or charitable giving funded out of the beneficiary’s share where appropriate).

Key Term: presumptive share
The proportion of the trust fund that a beneficiary would take if they satisfied the contingency or no further change occurred (for example, one-equal-share among the settlor’s children currently alive).

Exercise of Discretion

The power of advancement is purely discretionary. Trustees must consider whether to exercise it, taking into account the beneficiary's circumstances, needs, resources, and aspirations, and the potential impact on other beneficiaries and prior interests. The trustees’ decision-making must comply with the statutory duty of care (Trustee Act 2000 s 1): act reasonably and with suitable skill, obtain appropriate advice where needed, and keep records of deliberations. Trustees are not obliged to advance capital; they must review and consider requests rationally and in good faith, acting even-handedly between beneficiaries.

Examples of acceptable advancements:

• Setting up a business for a beneficiary (e.g., start-up capital, premises deposit).
• Purchasing a home to occupy, improving/renovating a property used by the beneficiary.
• Funding professional education or training (including tuition fees, materials).
• Restructuring interests to achieve tax/resource efficiencies where the arrangement materially benefits the beneficiary (Pilkington v IRC).
• In suitable cases, charitable donations from a wealthy beneficiary’s presumptive share may amount to “benefit” if it discharges a moral obligation and does not exceed resources unreasonably (Re Clore’s Settlement Trusts).

Cases cautioning trustees:

• Re Pauling’s Settlement Trusts: trustees should ensure advancements benefit the beneficiary, not third parties (such as parents’ personal debts). Adult beneficiaries’ informed consent may be required where the proposed use risks misapplication.

Worked Example 1.3

A trust created in 2010 holds £200,000 for Amy for life, remainder to her son Carl absolutely. Carl is 28. He asks the trustees for £50,000 to put down a deposit on his first house. Amy is supportive. Can the trustees advance the capital?

Answer:
Yes, the trustees can advance the capital, but subject to conditions. Carl has a vested interest in the capital (in remainder). Buying a house constitutes “advancement or benefit”. As the trust was created before 1 October 2014, the trustees can only advance up to half of Carl’s entitlement (£100,000), so £50,000 is within the limit. However, Amy has a prior life interest, and the advancement of £50,000 will reduce the capital generating income for her. Therefore, her written consent must be obtained before the advancement can be made. The £50,000 must be brought into account when Carl eventually receives the capital on Amy's death.

Worked Example 1.4

A trust created in 2019 holds £300,000 for the children of the settlor, David and Emily, contingent on them reaching 30, in equal shares. David is 26 and Emily is 22. David asks the trustees for £160,000 to start a new tech company. Can the trustees comply?

Answer:
No, the trustees cannot advance the full £160,000. David has a contingent interest in the capital. Setting up a business qualifies as “advancement or benefit”. The trust was created after 1 October 2014, so trustees can advance the whole of a beneficiary's presumptive share. David's presumptive share is currently one-half (£150,000). Therefore, the trustees can only advance up to £150,000, provided they consider it appropriate in their discretion. The request for £160,000 exceeds his share. No consents are required as there are no prior interests.

Worked Example 1.5

A 2018 trust holds £2m: “to my spouse for life, remainder to my three children in equal shares.” One child, Zara (aged 20), requests £200,000 to fund a postgraduate programme abroad. Will s 32 allow this, and what consents are needed?

Answer:
Yes. Zara has a presumptive remainder interest in capital. Postgraduate education fits “advancement or benefit”. Her presumptive share is currently one-third (£666,666). As the trust takes effect after 1 October 2014, the trustees may advance up to the whole of her presumptive share. However, the spouse is the life tenant with a prior income interest; the advancement reduces capital, potentially affecting income. Written consent from the life tenant (of full age and capacity) is required. The advance must be brought into account on final distribution.

Worked Example 1.6

A trust created in 2012 provides: “to my wife for life, remainder to my children who both reach 30 and qualify as solicitors.” One child, Alex (aged 24), seeks £40,000 to requalify in another jurisdiction. Does the double contingency prevent advancement?

Answer:
No. A double contingency does not bar trustees from advancing capital under s 32 to a beneficiary with a presumptive interest, provided the proposed use amounts to advancement or benefit and the statutory conditions are met. As this is a pre-2014 trust, the limit is one-half of Alex’s presumptive share. If the life tenant’s income might be reduced, written consent is needed. The advanced sum will be brought into account at final distribution.

Worked Example 1.7

A 2017 trust accumulates income for two children until they turn 18, then pays income until they reach 30, when capital vests. On turning 18, the son asks the trustees to pay one-seventh of his presumptive capital share to a named charity. Is this within s 32?

Answer:
Yes, in principle. Courts have accepted that funding charitable giving from a wealthy beneficiary’s share can be a material benefit to that beneficiary (for example, discharging a moral obligation), provided the sum is measured and does not unreasonably exceed their resources (Re Clore’s Settlement Trusts). Trustees must exercise discretion carefully, consider the beneficiary’s overall position, and ensure any prior life interests are not prejudiced without consent. The advancement must be brought into account.

Revision Tip

Always check the date the trust was created (or the date of death if it's a will trust) to determine whether the pre- or post-October 2014 rules apply to the s 32 power of advancement limit (half or whole share), and whether trustees can apply property as well as cash. For s 31, confirm whether the beneficiary’s gift carries intermediate income; contingent cash legacies typically do not.

Key Point Checklist

This article has covered the following key knowledge points:

• Section 31 TA 1925 allows trustees discretion to apply income for a minor beneficiary's maintenance, education, or benefit.
• Section 31 is available only where the minor has an interest in income and the trust carries the intermediate income; contingent pecuniary legacies generally do not carry intermediate income.
• Income not applied under s 31 must be accumulated; on turning 18, entitlement depends on the nature of the beneficiary’s interest.
• Adult beneficiaries with contingent interests are entitled to income arising after age 18 where the trust carries intermediate income; previously accumulated income is added to capital and vests when the contingency is met.
• Section 32 TA 1925 allows trustees discretion to pay or apply capital for a beneficiary's advancement or benefit before absolute entitlement.
• The limit for advancement under s 32 is the whole share for post-1 Oct 2014 trusts; it is one-half for pre-1 Oct 2014 trusts. Trustees may apply property (not just cash) post-2014.
• Prior life interests must not be prejudiced without written consent from the life tenant of full age and capacity.
• Advancements must be brought into account on final distribution, typically by proportionate adjustment rather than nominal sums.
• Both powers are discretionary and subject to the trustees' duty of care (Trustee Act 2000) and fiduciary duties, including even-handedness between beneficiaries.

Key Terms and Concepts

• Vested Interest
• Contingent Interest
• trusts that carry the intermediate income
• life tenant
• prior interest
• presumptive share
• Advancement
• Benefit