Q&As

Where a (security) trust is intended to benefit future beneficiaries but initially only benefits one party who is both trustee and sole beneficiary is it arguable that the legal and beneficial interests do not merge? If they do merge, can the interests be demerged if there are new beneficiaries in the future (ie when the sole lender sells down the loan) by a contemporaneous declaration by the trustee that it holds the property on the terms of the trust?

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Published on LexisPSL on 06/07/2018

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • Where a (security) trust is intended to benefit future beneficiaries but initially only benefits one party who is both trustee and sole beneficiary is it arguable that the legal and beneficial interests do not merge? If they do merge, can the interests be demerged if there are new beneficiaries in the future (ie when the sole lender sells down the loan) by a contemporaneous declaration by the trustee that it holds the property on the terms of the trust?

Where a (security) trust is intended to benefit future beneficiaries but initially only benefits one party who is both trustee and sole beneficiary is it arguable that the legal and beneficial interests do not merge? If they do merge, can the interests be demerged if there are new beneficiaries in the future (ie when the sole lender sells down the loan) by a contemporaneous declaration by the trustee that it holds the property on the terms of the trust?

We refer you to the following Practice Note which you may find useful for your purposes: The security agent and security trust provisions.

It is quite common for initially bilateral loans to be set up with agreements containing trust and agency provisions similar to those used in the syndicated loans market so that a later sale of participations in the loan by the original lender can take place if this is felt desirable.

The analysis of the first question depends upon the express terms of the document creating the trust and in particular whether the beneficiaries of the putative

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