Payments from income
51.Section 28 of the Act implements recommendation 26. It sets out for the first time a statutory power for trustees to make payments to beneficiaries of income which arises from the prospective share of the trust capital to which the beneficiary will become entitled under the trust, provided such payments are for the benefit of the beneficiary. An example of the use of this power might be where payments are made to a child beneficiary out of trust income for reasons of maintenance or education, before the age at which that beneficiary is entitled to receive their share of the trust capital. Subsection (1) contains the general power, but only if the conditions in subsections (4) and (5) are met. It is a default power. Conditions may be imposed by the trustees, and subsequently varied or waived: subsections (2) and (3). Subsections (4) and (5) set out the requirements that must be met if a payment is to be made. These are demanding, and will prevent any unduly liberal payments of income to beneficiaries under this section. At the time when the income is paid or applied, the income must be derived from capital which meets at least one of the criteria in subsection (4), and in addition no person other than the beneficiary must be entitled to that income (by subsection (5)). Under subsection (6), any amount paid or applied under the section must be brought into account by the trustees as part of the share to which the beneficiary is ultimately entitled, and subsection (7) assists in determining the value of the payment for these purposes. Subsection (8), which implements recommendation 26(2), provides that if the trust deed directs or permits the trustees to accumulate income, the Court of Session’s authorisation must be obtained in order to exercise the power to pay income to a beneficiary. Subsection (9) provides that the Court of Session’s power is exercisable on application by the trustees or any person with an interest. Finally, subsection (11) provides certain restrictions on potential liability of the trustees, and subsection (12) ensures that the new provision applies to all trusts but only in so far as a payment of income is made after the section comes into force.
