Q&As

Can trustees be given a power to determine what receipts are income and what are capital?

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Published on LexisPSL on 09/02/2021

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  • Can trustees be given a power to determine what receipts are income and what are capital?

Can trustees be given a power to determine what receipts are income and what are capital?

The decision in Re Wynn’s Will Trusts [1952] Ch 271

In Re Wynn’s Will Trusts a power for the trustees to determine conclusively ‘whether any moneys are to be considered as capital or income’ was held to be void. The judge said that the insertion of a clause of this type is undesirable, because it is likely to ‘mislead equally trustees and beneficiaries as to their true position and rights’. It was seen as an attempt to oust the jurisdiction of the courts.

Following this case, trustees should not be given a power for them to decide whether a sum is capital or income. Instead this is a matter of trust law and tax principles, which can be decided by the courts if necessary.

Are there any alternatives

However, it is possible to achieve much the same result in an acceptable way. A clause could be drafted to give trustees the discretion to pay income to beneficiaries with a capital interest or capital to beneficiaries interested in the income (eg the following type of clause is commonly found in trusts: 164 Clause for settlement—dispositive

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