Powers to Deal with Income and Capital
| Author | Lesley King/Peter Gausden |
| Pages | 207-211 |
18 Powers to Deal with
Income and Capital
When trustees hold assets for beneficiaries, it is important that they should
be able to apply income and capital early if beneficiaries are in need o f
funds.
There are statutory powers implied under sections 31 and 32 of the
Trustee Act 1925 which are often modified by express provisions.
18.1 Power to apply income – section 31 of
the Trustee Act 1925
Under this section, trustees can apply any available income towards the
maintenance, education or benefit of any minor beneficiary, whether his
interest is vested or contingent. Any income that is not applied for
maintenance, education or benefit must be accumulated.
18.1.1 When is income available?
Income is not ‘available’ if it has been expressly given to someone.
EXAMPLE
Sam leaves a trust fund of £500,000 ‘to my daughter if she reaches
25 and in the meantime to my mother’. The effect of this gift is that
Mother is entitled to the income from the trust fund until the
daughter reaches 25 so no income is available for the da ughter.
Income is also not available if, as a matter of general law, the gift does not
carry the right to intermediate income. Under section 175 of the LPA
1925, most gifts do carry the right to intermediate income, but contingent
pecuniary legacies do not unless one of the following applies:
(a) There is a direction to set aside a legacy fund for the ben efit of the
legatee (see Kidman v Kidman (1871) 40 LJ Ch 359).
(b) The legacy is payable to a minor child of the testator or to a minor
to whom the testator is in loco parentis and no other fund is designated
for the minor’s maintenance. The court will infer an intention to
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