When writing a will, an individual may leave funds in a trust, meaning the intended beneficiary will receive the bequeathed funds at a specific time set out by the testator.
For parents choosing to leave funds to their children, a trust may, therefore, serve as a platform to manipulate their children financially, subsequent to their death.
The will-writer may limit a beneficiary’s access to the money until they have reached a certain age for example or met a particular criterion, e.g. marriage.
For beneficiaries who have failed to meet the requirements outlined in the trust, they may seek advice on how to access the money. In this instance, the rule set out in Saunders v Vautier may be of benefit to them. This case states that if all beneficiaries of the trust have reached an adult age and are under no disability (sui juris), they may require the trustee to terminate the trust and transfer the legal estate to them.
The facts of the case concern a testator leaving stock in the East India Company worth £2,000 in trust for the beneficiary, Vautier. The terms stated that until Vautier attained the age of 25, the trust should be left to accumulate. This included the stock dividends along with the capital. When Vautier reached 21 – the age of maturity at the time – he wished to obtain access to the dividends and capital.
The ruling was in favour of the defendant. The rights of Vautier were held to outweigh the settlor’s wishes as expressed in the trust instrument.
The rule within this case is commonly used when a trust fund on a bare trust for a sole beneficiary is being held by a sole trustee. This is the case where a trust is held for the benefit of a deceased tenant for life, with the sole beneficiary being the remainderman.
Application is not, however, limited to these circumstances. More than one beneficiary can benefit from the rule in Saunders v Vautier, although they must all be sui juris.
The reasons why beneficiaries may choose to utilise the rule are numerous. As was the case in Saunders, beneficiaries may wish to terminate accumulation in order to access the funds, if the trust duration extends beyond the age of maturity.
Where a trust is held for a tenant for life and subsequently passes to the remainderman, both may choose to obtain the capital immediately by terminating the trust. If this is the case, a partition may be agreed between them. Such a decision may be made where changes in law result in unforeseen and unfavourable circumstances. For example, revenue law reform may mean the trust fund becomes subject to inheritance tax (IHT), following the death of the tenant for life.
