FLK2 · Trusts

Beneficial entitlement & types of trust

SQE1 revision notes — the key rules, leading cases and common traps for this topic, in plain English and current to 2026.

TR.03 — Beneficial Entitlement & Types of Trust

Core idea. A trust splits ownership: the trustee holds the legal title; the beneficiary holds the equitable (beneficial) interest. Equity treats the beneficiary as the "real" owner. The trustee's job is fiduciary — manage the property for the beneficiary, not themselves.

Fixed vs discretionary trusts

Fixed trust — beneficiaries' shares are defined ("to A and B equally"). Certainty of objects test: the complete list test (IRC v Broadway Cottages) — you must be able to list every beneficiary.
Discretionary trust — trustees choose who, among a class, benefits and how much. Objects test: the "is or is not" / given postulant test (McPhail v Doulton; Re Baden (No 2)) — can you say of any given person whether they are or are not within the class. No list needed.
Power of appointment (not a trust duty): same "is or is not" test (Re Gulbenkian), but trustees may, not must, exercise it.

Vested vs contingent

Vested interest — already belongs to the beneficiary (even if possession is postponed). A vested interest passes to the beneficiary's estate on death.
Contingent interest — depends on a future event (e.g. "to A if she reaches 21"). If the condition fails, the interest fails.

The Saunders v Vautier rule

A beneficiary who is adult (18+), of sound mind, and absolutely entitled can demand the trust property and end the trust early — overriding the settlor's wishes. If interests are shared, all beneficiaries together (sui juris, between them absolutely entitled) can collapse the trust (Saunders v Vautier).

Bare trusts

Trustee holds for a single absolutely-entitled beneficiary with no active duties — beneficiary can call for the property at any time.

Common traps

Don't confuse the certainty-of-objects tests. Fixed = complete list; discretionary/powers = is-or-is-not. Mixing them loses marks.
Administrative unworkability can still void a discretionary trust even if the is/is/not test is met (R v District Auditor ex p West Yorkshire — "all residents of West Yorkshire").
Conceptual vs evidential certainty. Only conceptual uncertainty (vague class definition) is fatal; evidential gaps are not.
Vested ≠ in possession. A remainder can be vested but enjoyed later.
Saunders v Vautier needs all beneficiaries acting together and absolute collective entitlement — one minor or unborn beneficiary blocks it.

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A woman is the treasurer of a small amateur football club. Members pay £20 each month in cash. Under the club rules she accepted on becoming treasurer, she must bank the subscriptions into the club's dedicated account within seven days. One month she receives £200 in subscriptions and spends the cash on her own gas bill that same day. She intends to replace the money from her wages before anyone notices, and pays an equivalent £200 into the club account two weeks later. Which statement best explains how section 5(3) of the Theft Act 1968 applies to the subscriptions when she pays the gas bill?

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