Section 650: Absolute, limited and discretionary interests
2489.This section defines the three types of interest in the whole or part of the residue of an estate. It is based on sections 698 and 701of ICTA.
2490.Subsection (1) defines an absolute interest in the whole or part of the residue of an estate. Subsection (1)(a) refers to the capital being properly payable to the person with the interest if the residue had been ascertained. This simply reflects the fact that the amount of any residue, and the income from it, can only be an estimate until the residue has been ascertained.
2491.Subsection (2) defines a limited interest in the whole or part of the residue of an estate. Subsection (2)(b) mirrors subsection (1)(a) of this section.
2492.Subsection (3) defines what is referred to as a “discretionary interest” in the whole or part of the residue of an estate for the purposes of this Chapter. The income has to be properly payable to the person with the discretionary interest “if the residue had been ascertained at the beginning of the administration period”. Effectively, this imposes a working assumption that there will be sufficient income from the residue to make the discretionary payments when the residue has been ascertained.
2493.Subsection (4) covers the following four situations:
income/capital properly payable directly to the person with the interest;
income/capital properly payable to the person with the interest indirectly through a trustee or other person;
income/capital properly payable for the benefit of the person with the interest to another person in that person’s right, and that income/capital is paid directly to that other person; and
income/capital properly payable for the benefit of the person with the interest to another person in that person’s right, and that income/capital is paid indirectly through a trustee or other person.
2494.An amount is only treated as properly payable to a person if it is “properly payable to the person, or to another in the person’s right, for the person’s benefit”. This makes it clear that, whether the amount is properly payable to the beneficiary or to another in the beneficiary’s “right”, it must still be payable for the beneficiary’s benefit (eg where a payment is made to a person having a power of attorney for a beneficiary). An example of a situation in which this condition is not met is where the residuary beneficiary is in bankruptcy. The income/capital would not be properly payable to the residuary beneficiary but would be payable to the trustee in bankruptcy in his or her right. But any payments would not be made for the benefit of the trustee in bankruptcy as the trustee receives them in a fiduciary capacity.
2495.Subsection (5) deals with the situation where personal representatives would have an absolute or limited interest in the residue of another deceased person’s estate if a right they have as personal representatives were vested in them for their own benefit. In these circumstances they are treated as having that interest. The term “personal representatives” is defined in section 878(1) of this Act.
2496.Subsection (6) makes it clear that for the purposes of subsection (4) it does not matter whether the payment is made directly to the beneficiary by the personal representatives or through a trustee or other person. For example, the payment may be made to the guardian of a child or to whoever is appointed to look after the finances of a mentally incapacitated adult.
